Oil Price Correction Due, Say Analysts, as Brent Nears $110

Some analysts are predicting Brent will hit $110/bbl this week.

Market analysts last week pointed to political issues in Egypt and fears of Middle East supply disruptions to explain an oil price rally that saw a 5 percent gain for Brent and a rise of 6.7 percent for U.S. crude futures, but as Brent heads towards $110/bbl this week, CNBC reports some market watchers are instead predicting a downward price correction.

"I expect that the run-up is almost over," said Mark Waggoner, President of Excel Futures, Inc. in Bend, Oregon.

"Look for WTI to break back below $100 next week. Demand is still not as high as it could be. The push to fill retail outlets should be done now (ahead of the high-demand U.S. summer driving season, which runs from runs from around late May to early September)."

And despite U.S. fuel stockpiles reported to be in seasonal decline, analysts say they are still above the upper limit of the average range for this time of year.

The good news for buyers of marine fuel in the primary bunkering ports is that, despite rising bunker prices during the week, the relative gains were not as much as those made by crude.

Prices for key grade 380 cSt bunker fuel in Singapore seem to have been particularly slow to respond, perhaps helped by fuel oil stocks that hit a 39-month high towards the end of last month.

Data from Ship & Bunker showed Friday's price for IFO380 at the port of $590.50 per metric tonne (pmt) was just $2.50 higher than the previous week, compared to week-on-week gains in Rotterdam and Houston of $12.50 and $10.50 respectively.

For the first six months of the year the product in Rotterdam has been, on average, priced around $20 pmt lower than Singapore, but on Friday that spread had narrowed to just $1.50 pmt lower.