Early gains helped prices rise above $72 per barrel on the New York Mercantile Exchange Tuesday, but ultimately oil fell to settle just below yesterday's close.
With intra-day trading reaching $72.77 a barrel on the NYMEX, oil prices rose in the morning, but then dropped to close 15 cents lower than Monday at $70.47 a barrel.
"Oil tried to rebound early on 1.) yesterday's sell off was a bit overdone, and 2.) the dollar was under some pressure today, and that brought some light buying back into the market," explained Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska. "But overall, the lack of fundamental support dropped it back down about mid-day, early in the afternoon; and we really haven't been able to recover fully from there."
In London, Brent crude dropped 69 cents to settle at $69.55 per barrel on the ICE Futures for August delivery.
Oil experienced a seven-month high last week, reaching above $73 a barrel on a weak dollar and signs that the world economy may be on the rise. Newsom revealed that the market will remain steady in the short-term, despite non-commercial investments.
"Most notably, we're going to see rounds of non-commercial activity, both buying and selling, which is going to leave some vacuums in the market," Newsom said of future activity. "But more importantly, we still have a bearish underlying fundamental situation, underlying supply and demand that's just not going to push it higher."
Despite a gain yesterday in the market, natural gas fell slightly to settle at $4.129 on the NYMEX Tuesday.
"Natural gas is trying to turn around; it's been trying to turn around the last couple of days," said Newsom. Despite this, he said, "It's still this very bearish market."
An uptrend is dependent on investment, not fundamentals, he continued.
"It's going to come from the investment side of the market, most likely covering short positions that have already been established," Newsom said. "As we get further into the summer, I think what we're going to see are some of those positions being covered. You're going to see some non-commercial short-covering, and that’s going to bring some support back into the market. It's not from a tight supply and demand situation right now."
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