Oil futures settled lower Monday after extending an overnight slide that saw the front-month NYMEX crude contract trade below $90/barrel for the first time since December 26.
NYMEX April crude settled 56 cents lower at $90.12/b, while ICE April Brent closed US trade down 31 cents at $110.09/b after market sentiment held a bearish tone in the wake of recent lackluster PMI data out of Asia and Europe.
Analysts said that a larger-than-expected downturn in China's non-manufacturing PMI data, released over the weekend, combined with ongoing concerns about stability in the eurozone following Italy's parliamentary elections early last week and a diminishing geopolitical risk premium, were all contributing to lower prices.
Italy's parliament remained gridlocked to start the week, contributing to a further downturn in the value of the euro, which slipped back below the 1.30 mark against the dollar through much of the US session.
Market attention turned toward the European Central Bank meeting scheduled for Thursday, with speculation that ECB President Mario Draghi could discuss further easing measures, although interest rates are expected to remain unchanged at 0.75%.
A more upbeat tone in talks with Iran late last week has diminished the geopolitical risk premium, analysts said, adding to a downward trend in oil, particularly Brent crude, prices.
"Last week's meeting was taken quite positively by Iran," PetroMatrix commodities analyst Olivier Jakob said. "The selloff last year was linked to the perception at the time that maybe there would be a solution found around sanctions for Iran."
Commodity Futures Trading Commission data released Friday showed a sharp fall in net length among money managers across the NYMEX complex. Money managers cut net length by 31,111 lots over the week that ended February 26.
The drop in net long positions "could continue for a few more weeks," said Citi Futures perspective analyst Tim Evans. "The data from February 26 showed that [net long positions] were still above average in terms of size -- we didn't unwind 10 weeks of excess in one week. It could take a few more weeks before long positions are back to more moderate levels," he said.
Ahead of this week's decline, net long positions among money managers were sustaining record levels.
Product markets were also weaker Monday, with NYMEX April RBOB hitting an intraday low of $3.0786/gal before settling 3.03 cents below Friday's settle at $3.0983/gal.
"Part of today's loss I'd put in the context of Friday's bounce, which clouds the issue of what the larger trend is in terms of price," Evans said.
"The other thing to underscore is the ongoing divergence between market expectations of a heavy cycle of refinery maintenance with actual gasoline production numbers. The [Department of Energy] report for the week ended February 22 showed gasoline production at 9.211 million barrels, which was the highest weekly output since the end of August," he said.
The American Petroleum Institute is scheduled to release fresh US fuel inventory data late Tuesday afternoon, with the US Energy Information Administration numbers scheduled to be released Wednesday morning.
NYMEX April heating oil settled 1.10 cents lower at $2.9191/gal.
