Prices of oil declines as U.S. supplies and speculative length offset OPEC cuts

Prices of oil

The prices of oil went down as the large amount of U.S. supplies and excess speculative length canceled out the tension between Iran and the United States and the efforts made by OPEC to cut oil production.

The futures contracts for the benchmark oil for gauging prices, Brent crude, fell 1.9 percent or $1.09 settling at $55.72 per barrel, while U.S. West Texas Intermediate crude dropped 1.5 percent

The Brent premium over WTI closed I to its smallest since January 19 at $2.09 per barrel.

President of Chicago-based energy advisory firm Ritterbusch & Associates, Jim Ritterbusch said “We feel that the bulk of the price decline related to the larger-than-expected increase in net WTI speculative length as well as another hefty increase in the (U.S.) oil rig count.”

According to Ritterbusch and others, the crude price drop was due to weakness in gasoline futures. U.S. gasoline futures dropped 2.8 percent on Monday.

The U.S. Commodity Futures Trading Commission (CFTC) said on Friday that hedge funds and other speculators aided their bullish bets in U.S. crude futures and options in the week to the 31st of January to the highest level on record.

“There are a lot of longs in the market, and if we don’t see prices rise those longs will get discouraged and exit the market as fast as they entered over the past few weeks,” Tyche Capital Advisors trader, Tariq Zahir said.

Oil prices, while still supported by OPEC’s output cuts and the arising tension between Iran and the United States, are still struggling for new direction.

The tension between Tehran and Washington started when an Iranian missile test that prompted the US to lay down sanctions on individuals and entities linked to the Revolutionary Guards.

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