Oil Prices Slip And Short Term Reversal Predicted - As Well As Oil Breaching $80

Meanwhile, U.S. becomes India's top oil importer: File Image/Pixabay

Strong economic news from China proved to be no match for the worry that last month's winter storm in Texas could keep boosting crude inventories, and as a result crude prices on Monday dipped slightly.

Following gains earlier in the session due to data showing that China's industrial output growth quickened more than expected in January-February and daily refinery throughput rose 15 percent from a year earlier, Brent settled at $68.88 per barrel, losing 34 cents.

West Texas Intermediate settled at $65.39 per barrel, shedding 22 cents.

Traders were concerned about Washington on Monday announcing tax increases on corporations, high earners, and fuel, which could crimp oil demand; they were also skeptical of positive news coming from U.S. oil inventory data to be released on Tuesday and Wednesday.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, "There's talk that because of the Texas power outages, we may see another increase in inventories this week."

With an eye on hedge funds and activities among other money managers, John Kemp, commodities analyst at Reuters, suggested on Monday that the outlook for crude prices is becoming more uncertain after a strong four-month rally.

He wrote, "Bullish long positions outnumber bearish short ones by a ratio of 5.75:1.....indicating positioning is already somewhat lopsided and increasing the probability of a short-term reversal."

Kemp added, "Positions in crude...are more stretched than in fuels....which confirms that persistent OPEC+ output restrictions rather than recovering consumption is the main underpinning for bullish views."

With regards to the Organization of the Petroleum Exporting Countries, India in February purchased record levels of U.S. crude to offset the cartel's output cuts, to the tune of a 48 percent rise or 545,300 barrels per day (bpd) compared to January.

By contrast February imports from Saudi Arabia fell by 42 percent from January to a decade low of 445,200 bpd, according to data compiled by Reuters.

Meanwhile, traders are watching for signs that more barrels of oil from Iran may hit the market amid U.S. efforts to return to the nuclear deal.

Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors, said, "The possibility of Iranian oil coming back onto the market at some point," is weighing on the supply outlook, and "getting them back into the nuclear deal, allowing some sanctions to be lifted and oil to be sold, that's a lot of oil in the market."

Still, the market overall remained bullish: Bank of America Global Research raised its full-year forecasts for global and U.S. benchmark crude futures, while Citigroup Inc. predicted Brent may even hit $80 per barrel in the next few months.