Yemisi Izuora/Ijeoma Agudosi-Agency Report
Oil fell more than $1 toward $61 a barrel on Wednesday, failing to build on gains of more than 1 percent in the previous session as analysts said a recent rally was overblown.
“The lack of follow-through higher yesterday is a worry and there’s plenty of reason to be neutral here and observe carefully,” PVM Oil Associates director and technical analyst Robin Bieber said.
Oil prices have risen more than 35% since hitting an almost six-year low of $45.19 in January, in an ascent fuelled by lower industry spending and falling US rig counts.
Benchmark Brent crude futures were down $1.03 at $61.50 by 1114 GMT, having fallen to a low of $61.11 earlier in the session. US crude traded at $52.89 a barrel, down 64 cents.
“The contracts will look very fragile and accident-prone if one or two more contracts fail to hold key support,” Bieber said.
Volumes were significantly reduced in early trading as several Asian countries started the Lunar New Year holidays, which last for the rest of the week.
BNP Paribas analysts said the recent surge in prices was premature given record-high US crude stocks.
“US refinery outages, through seasonal maintenance and industrial action, will weaken US crude demand, exacerbating the crude stock excess in the near term,” oil strategists Gareth Lewis-Davies and Harry Tchilinguirian said in a note to traders.
US commercial crude oil stockpiles are already at their highest since records began and are expected to have risen again last week by 3.1 million barrels, a preliminary Reuters survey showed on Tuesday.
US stocks data from industry group the American Petroleum Institute is due later on Wednesday.
Instability in the Middle East helped support the market, however, and Commerzbank analysts said prices could turn positive later on Wednesday following the prior session’s 2015 high of $63.
“Yesterday’s price response shows that oil prices still want to climb,” senior oil and commodities analyst Carsten Fritsch said. “Brent … is profiting from the renewed shift in focus towards supply risks.”
Egyptian President Abdel Fattah al-Sisi called on Tuesday for a United Nations resolution mandating an international coalition to intervene in Libya against Islamic State militants.
Libya’s oil exports have collapsed to less than 200,000 barrels per day (bpd), down from 1.6 million bpd before the 2011 civil war, as violence in the country has shut all major ports.