After early year slump, crude oil returns to profit

Source Commonwealth Bank

Source Commonwealth Bank

Oil prices settled with a loss on Monday (http://www.marketwatch.com/story/oil-prices-pull-back-from-strong-finish-last-week-as-market-renews-us-supply-watch-2018-03-12), giving back part of the sharp gains seen in the previous session as recent data showed a rise in weekly USA output, as well as expectations for a further increase in domestic production next month.

Friday's strong US payroll data, which showed a hefty 313,000 rise in jobs but tempered growth in hourly earnings, supported Treasuries in early trade. But U.S. crude fell as much as 2.21 percent on Monday, to $60.67 per barrel, before bouncing back to $61.35, down 1.11 percent.

The Dow Jones Industrial Average fell 104.75 points, or 0.41 percent, to 25,230.99 and the Nasdaq Composite added 36.21 points, or 0.48 percent, to 7,597.02.

"It appears that money managers are getting rid of their long positions and this is why the front-end spreads of the two main crude oil futures contracts have been drifting lower lately".

That has undercut some of the enthusiasm for oil, as investors weigh increased USA supply against the likelihood that the Organization of the Petroleum Exporting Countries and non-Opec producers will maintain supply cuts that have been in effect for more than a year. The resulting fallout could drag down crude prices after a rally of more than 40 percent since June, he said.

"Oil prices fell on the back of concerns that surging USA production. could push inventories in the USA higher", ANZ bank said on Tuesday.

On Monday, benchmark 10-year notes last rose 8/32 in price to yield 2.8663 percent, hovering near multi-year highs.

Increased supply did not quell demand for the notes, a positive sign for the heavy issuance expected in the year ahead.

"Nothing really stood out", said Goncalves, head of U.

U. S. stocks closed mixed.

Emerging market stocks rose 1.21 percent. Some of the pressure is coming from a recovery in the U.S. Dollar, which could affect foreign demand.

ING's Patterson agrees that keeping a lid on price hikes is necessary; in an interview in Singapore he said, "We need to see prices in the short-term trade below $60 to reduce that incentive for USA producers".