Oil sinks below ‘technical support’

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Oil sinks below ‘technical support’Earlier gains for oil futures on the back of increased tensions in the Middle East gave way to sizeable declines yesterday.

August West Texas Intermediate crude lost $1.41, or 2.5 per cent, to $55.37 a barrel on the New York Mercantile Exchange after falling 1.5 per cent the previous day.

International benchmark September Brent declined by $1.23, or 1.9 per cent, at $62.43 a barrel on ICE Futures Europe, after tumbling 1.1per cent on Wednesday, ready for the lowest settlement since July 3.

Prices fell below technical support levels, sending U.S. benchmark crude to its lowest in roughly a month.

“The failure to reignite a rally today led to a retracement below $57 where sell stops were triggered, so it was more of a technical selloff,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch.

Prices had been trading higher early Thursday, after Iran’s Revolutionary Guard said it seized a foreign oil tanker, which it claims was smuggling one million liters of fuel near the island of Larak in the Persian Gulf on Sunday, according to The Wall Street Journal which cited Iran’s state news agency IRNA.

Prices posted declines on Wednesday after the Energy Information Administration (EIA)  reported that domestic crude supplies fell for a fifth consecutive week, but by less than the market expected—and petroleum products posted sizable gains.

Crude stockpiles were down 3.1 million barrels for the week ended July 12. They were forecast to fall by 4.2 million barrels, according to analysts polled by S&P Global Platts.

Steeves pointed out that the reaction to the EIA data “focused on the builds in the products rather than the crude stock draw.”

On Nymex Thursday, August gasoline RBQ19, -2.60%  fell 4.4 cents, or 2.3%, to $1.8342 a gallon and August heating oil HOQ19, -1.80%  lost 2.7 cents, or 1.4%, to $1.8658 a gallon.

In the Middle East, the Iranian tanker seizing comes after a series attacks and damages to ships in the Strait of Hormuz, the world’s most sensitive oil-transportation chokepoint, which remains the center of tensions between the Islamic Republic and the U.S. which exited a nuclear agreement pact and leveled fresh sanctions against Tehran.

The recent Middle East conflict come amid reports of a softening rhetoric between Iran and the U.S. officials, which some say could push crude prices higher as new supplies hit the market if energy-export sanctions are lifted.

However, some analysts expressed skepticism about a near-term Tehran-Washington resolution, with testiness between the countries providing support for energy prices.

“There remains a high level of scepticism over possible Iran-U.S. talks, after all, it was only a few weeks ago the U.S. administration hawks were calling for bombs away suggesting that some traders are viewing [Middle East] risk premium cheap at current oil prices,” wrote Stephen Innes, managing partner at Vanguard Markets, in a Thursday market report.

Meanwhile, natural-gas prices saw modest moves in the wake of the latest EIA report, which revealed that domestic supplies of natural gas rose by 62 billion cubic feet for the week ended July 12. The data were expected to show a build of 65 billion cubic feet, on average, according to analysts polled by S&P Global Platts.

August natural gas NGQ19, -0.91%  traded up by less than half a cent, or 0.1%, at $2.308 per million British thermal units.

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