Oil futures fell Tuesday, with analysts noting that nearby futures on U.S. benchmark crude have slumped below later-dated contracts, reflecting concerns over a buildup in inventories after last month’s Texas deep freeze.
West Texas Intermediate crude for April delivery was down 76 cents, or 1.1%, at $64.63 a barrel on the New York Mercantile Exchange. The May WTI contract changed hands at $64.70 and has traded at a premium to the nearby month for three sessions, a condition known as contango.
“A bearish contango structure for WTI is not surprising many given the strong build [in inventories] over the past couple of weeks,” said Edward Moya, senior market analyst at Oanda, in a note.
May Brent crude the global benchmark, was down 82 cents, or 1.2%, at $68.06 a barrel on ICE Futures Europe.
The Energy Information Administration reported last week that U.S. crude inventories rose by 13.8 million barrels for the week ended March 5. That followed a hefty 21.6 million-barrel climb the week before as domestic refinery activity continued to recover from mid-February winter storms in Texas.
Crude futures shook off the rising inventories previously, aided by strong falls in gasoline and other products. But analysts said the size of the buildup, a persistently firmer tone for the U.S. dollar, a troubled vaccine rollout in Europe and jitters over the potential for COVID-19 variants to cause problems in the U.S. were sufficient to cool a crude rally that still sees both WTI and Brent up more than 30% year-to-date.
“The crude demand outlook still remains the key for higher prices and if short-term risks continue to grow due to virus variants, oil prices could be in for modest 10% pullback,” Moya said.