Oil prices declined, giving away most of the strong gains made so far this year amid forecasts of a warmer weather in the US following a few weeks of unusually low temperatures in key energy consuming countries including the US and China to boost the demand for heating oil, which was the main factor behind the crude’s surge.
The National Weather Service said that heating oil demand would be normal this week following last week’s 12% increase, while weather forecasts predict warmer than average temperatures late in the week.
Meanwhile, the US Dollar slightly recovered from its recent falls today on indications that China upped its one-year bill yield to signal a possible increase in interest rate and a reversal of its stimulus policy, while yesterday’s quarterly report from American aluminium giant Alcoa (NYSE: AA) missed market expectations, spurring investments into currencies to avert risks.
Being under pressure from a stronger US Dollar and expectations of a warmer weather, February Brent Crude fell to US$80.30/barrel in London after climbing above US$82/barrel last week, while US light, sweet crude retreated to US$81.75/barrel after standing just short of US$84/barrel a day ago.
The API (American Petroleum Institute) is set to release its weekly inventory data today with an increase of 1-2 million barrels expected.
Supermajors BP (LSE: BP) and Shell (LSE: RDSB) slid 1% and 1.5% respectively, while fellow FTSE 100 constituents Cairn Energy (LSE: CNE) and Tullow Oil (LSE: TLW) also lost 1.5%. BG Group (LSE: BG) went against the tide, posting a marginal gain.
Service companies Amec (LSE: AMEC) and Petrofac (LSE: PFC) were down 1.4% and 2.8% respectively.
Midcaps also were in decline. Salamander Energy (LSE: SMDR) led the retreat with a loss of nearly 5%. Melrose Resources (LSE: MRS) and Premier Oil (LSE: PMO) lost 4.3% and Heritage Oil (LSE: HOIL) was down 3.3%. JKX Oil and Gas (LSE: JKX) and Dana Petroleum (LSE: DNX) followed, shedding 1% and 2% respectively.
Dragon Oil (LSE: DGO) and Soco International (LSE: SIA) did better, posting small gains.
Service companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) declined 2.3% and 2.8% respectively.
Juniors didn’t show much movement today. Irish oil and gas exploration company Petroceltic International (AIM: PCI) fell 9%, while Kazakhstan operating Max Petroleum (LSE: MXP) and US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) followed with losses of 3.5% and 3% respectively.