Brent futures slipped back towards $105 (€80.26) a barrel today as investors saw the recent surge in prices as an opportunity to sell and book profits, with concerns of an escalation in tensions in the Middle East helping to stem losses.
The benchmark hit its highest in nearly a month above $105 in the previous session as supply worries following Israeli air strikes on Syria trumped concern of weak global demand. Oil also drew support from a record close of the Standard & Poor’s 500 Index on hopes of a steady US recovery.
Brent crude slipped 36 cents to $105.10 a barrel in early day trade, after settling up at $105.46, its highest finish since April 10th. Brent has rebounded more than $6 a barrel since falling below $99 last Wednesday. US oil fell 44 cents to $95.71, after ending 55 cents higher.
“There is some profit-taking coming in after the sharp rise in prices we saw in the recent days,” said Astmax Investments commodities sales manager Tetsu Emori. “The current fundamentals are very weak with China slowing down and with US demand not so strong”, he added.
Israel played down weekend air strikes close to Damascus reported to have killed dozens of Syrian soldiers, saying the raids were not aimed at influencing its neighbour’s civil war but only at stopping Iranian missiles reaching Lebanese Hezbollah militants.
Expectations of a further build in US commercial crude stocks after hitting a record high are also weighing on prices.
A preliminary Reuters poll, taken ahead of weekly inventory reports from the American Petroleum Institute (API) and the US Energy Department’s Energy Information Administration (EIA), forecast on average that crude stocks increased by 1.8 million barrels in the week ended May 3rd.
Brent looks like forming a top around $105.50 per barrel and is due for a deep correction, while US oil is expected to retest support at $94.65, according to Reuters technical analyst Wang Tao.
