By Bryan Sims
HOUSTON (Reuters) - Oil prices retreated from big gains on Thursday, but still managed to settle at three-year highs after the global Brent benchmark hit $70 a barrel on signs of tightening supply in the United States.
Brent crude futures
Brent has gained 5 percent since the beginning of the year, picking up from its late-year surge.
U. S. West Texas Intermediate (WTI) crude futures
Prices came off highs after an early surge that took benchmarks past key resistance levels that produced a flurry of buying in an active day in the market. However, analysts said it would take more than one day to convincingly break through $70 a barrel on Brent.
The relative strength index (RSI), which measures the speed and breadth of a rally, shows oil in an overbought condition, suggesting the move has come too far, too fast.
On Wednesday, the U. S. Energy Information Administration said crude inventories
Production slowed by nearly 300,000 barrels per day, which analysts attributed to colder-than-usual weather across the United States last week.
Adding to bullish sentiment on Thursday, market intelligence firm Genscape estimated a draw of more than 3.5 million barrels at the Cushing, Oklahoma delivery point for U. S. crude futures for the week ended Tuesday, according to traders who saw the data.
Production cuts, led by the Organization of the Petroleum Exporting Countries and Russia, which are set to continue throughout 2018, have underpinned prices.
The United Arab Emirates (UAE) Energy Minister and OPEC President Suhail al-Mazrouei said he expects the market to balance in 2018 and that the producer group is committed to its supply-reduction pact until the end of this year.
The greenback-denominated commodity has also benefited from weakness in the dollar <. DXY>, which neared a one-week low on Thursday, as it makes oil cheaper to buy for holders of other currencies.
Trading volumes were higher than average, with a flurry of trades at about 10 a.m. EST as prices jumped. More than 820,000 U. S. crude contracts changed hands on Thursday, far surpassing the daily average of 619,000 contracts over the past 200 days of trading.
ICE Commitment of Traders figures showed speculators raised their net long holdings of Brent crude futures and options in the week to Jan. 2 to a new record. Heavy bets like this are at risk of being unwound after quick gains.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)