NEW YORK (AP) – Crude oil futures settled 1 percent lower Monday, as funds continued to unwind their bets that prices would rise following bearish inventory data last week.
The latest government data released Friday by the Commodity Futures Trading Commission showed well-financed speculators like hedge funds held a net long position as of Oct. 14 for the first time since early September.
Shortly thereafter, the federal Energy Information Administration reported unexpectedly large growth in U.S. commercial inventories of crude oil, triggering a two-day sell-off that was extended Monday. Prices have fallen 5 percent the past three trading sessions on the New York Mercantile Exchange.
“To me it just looks like a pause in the next downleg,” said Tom Bentz, futures analyst with BNP Paribas in New York. “I think the rally (from late September) was not based on fundamentals. it was basically fund buying, and technical, and they ran it, and had everybody buying the thing. But at some point, it comes back to fundamentals, and I’m not so sure the market was warranted up at $32.50.”
Heavy long positions can make futures markets prone to sharp setbacks, as they signify large numbers of potential sellers. Crude oil futures plunged 3 percent on Friday.
Light, sweet November crude oil futures settled Monday down 33 cents on the Nymex at $30.35 a barrel after touching a low of $29.80. The November contract expires at the end of trading Tuesday.
On London’s International Petroleum Exchange, December Brent blend crude oil futures settled down 33 cents at $28.70, after touching a low of $28.05.
“I think the market’s down because it’s overvalued,” said Bill O’Grady, analyst at A.G. Edwards. “Inventories are too high to support prices at these levels. Either inventories are going to fall real soon, or prices are simply too high. I just think they’re simply too high.”
O’Grady said his model, based on existing crude oil fundamentals, calls for $27 a barrel oil.
Gasoline futures surprised many analysts by rising during the day. November gasoline futures settled up 0.93 points, or 1 percent, at 85.87 cents a gallon after touching a high of 86.50.
Analysts and traders attributed gasoline’s rise to reports of an explosion Sunday at Petroleos de Venezuela SA’s Paraguana refinery in Venezuela. The state oil company denied any effect on operations at Venezuela’s largest oil refining complex. Venezuela is traditionally a major supplier of gasoline to the U.S., though exports were hurt by a two-month strike early this year and its aftermath.
Heating oil futures settled down 0.80 points, or 1 percent, at 82.34 a gallon after touching low of 80.70. Natural gas for November delivery fell 26.4 cents to settle at $4.772 per 1,000 cubic feet.
