SINGAPORE — Brent crude extended its rally yesterday, moving further away from six-year lows hit in January, but some analysts warned that prices had risen too far and could face a downward correction.
Benchmark Brent crude futures were trading up 50c at $61,90 a barrel by 4:20am GMT, while US West Texas Intermediate (WTI) crude had risen 26c to $53,04 a barrel.
“The recent bullishness is not heavily backed by technical and fundamental analysis and so should not last,” Phillip Futures’ Daniel Ang said.
“The market is getting increasingly dubious as to this rally, with the CFTC (Commodity Futures Trading Commission) showing that non-commercial net long positions are starting to fall,” ANZ bank said in note.
Analysts said downward pressure may come from the refined products market in the next quarter.
“Consensus expects large inventory builds and pricing pressure for oil markets in 2015,” Morgan Stanley said on Monday.
Demand for refined oil products has been strong in Asia, which is structurally short and producers have been taking advantage of low crude prices to cover themselves with fuel and build up product inventories.
With Brent prices outperforming US contracts, the spread between the two benchmarks had risen to almost $9 a barrel, the highest level since August last year and the trend would continue, analysts said.
“Considerable pressure is likely to build on WTI as inventories approach the EIA’s (Energy Information Administration’s) 71-million barrel working storage capacity figure and we would therefore expect a wider WTI/Brent spread (low double-digit territory),” said JBC Energy.
In commodities investment, Australia’s Macquarie Group said it was considering acquisitions in futures, physical oil and refined products businesses.
Macquarie’s fixed income, currencies and commodities business now generates about 60% of its operating income from commodity markets.
The announcement comes at a time when many other banks have scaled back or sold their energy and commodities businesses.