Oil Slips From Near Four-Week High; Hedge Funds Cut Bullish Bets

By Ben Sharples - Apr 30, 2012 8:47 AM GMT+0700

Oil slid from the highest close in almost four weeks, trimming a monthly gain, as investors speculated that recent price gains may be unsustainable.

Futures fell as much as 0.3 percent after climbing for a second week. Oil’s advance halted after it failed to surpass its 50-day moving average, a technical resistance level at which traders typically sell. Hedge funds cut bullish crude bets last week, the Commodity Futures Trading Commission said. Output by the Organization of Petroleum Exporting Countries climbed to the highest level in more than three years in April. A report this week may show U.S. employment rose this month.

“The market has decided to get ahead of itself and that’s effectively what we’re seeing,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “There are areas or pockets which are holding the price of crude up when oil should be a lot lower. Employment will be the key this week.”

Crude for June delivery fell as much as 27 cents to $104.66 a barrel on the New York Mercantile Exchange and was at $104.69 at 11:11 a.m. Sydney time. The contract advanced 38 cents, or 0.4 percent, to $104.93 on April 27, the highest close since April 2. Prices are 1.6 percent higher this month and up 6 percent this year.

Brent oil for June settlement was at $119.58 a barrel, down 25 cents, on the London-based ICE Futures Europe exchange. Prices are down 2.7 percent this month, heading for the first monthly decline since December. The European benchmark contract’s front month premium to West Texas Intermediate was at $14.89, from $14.90 on April 27.

Technical Resistance

Oil in New York has technical resistance along its 50-day moving average, at $105.17 a barrel today, according to data compiled by Bloomberg. Futures have closed below this indicator every day since April 4.

Crude’s trading range in April is the tightest for any month in 17 years as concern eased that supplies would be disrupted and reports showed slower U.S. economic growth. This month’s price has ranged from $100.68 to $105.49 a barrel, a difference of 4.8 percent. That’s the smallest since February 1995, when the price ranged from $18.13 to $18.98.

New York futures rose to $110.55 a barrel on March 1 as Western nations prepared sanctions against Iran, then slipped as tension eased. U.S. gross domestic product growth slowed to a 2.2 percent rate in the first quarter, according to the Commerce Department.

Hedge Funds

Money managers, including hedge funds, cut bullish oil wagers by 2,878, or 1.4 percent, to 196,426 futures and options combined in the seven days ended April 24, according to the Commodity Futures Trading Commission’s Commitments of Traders report on April 27.

OPEC production increased 305,000 barrels, or 1 percent, to an average 31.405 million barrels a day in April from a revised 31.1 million in March, according to a Bloomberg News survey of oil companies, producers and analysts. Output increased to the highest level since October 2008. The March total was revised 10,000 barrels a day lower.

Payrolls climbed by 165,000 workers after a 120,000 gain in March, according to the median forecast of 64 economists surveyed by Bloomberg News before Labor Department data due May 4. Manufacturing and services grew at a slower pace, other reports may show.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net