The FINANCIAL -- Oil prices fell on April 21 on concerns the recent rally might not be sustainable, according to Nasdaq.
U.S. oil prices have risen close to 30% since a low in March on expectations the oversupplied market will come into balance later in the year. But analysts have warned that although U.S. oil production will slow in the coming months, other major producers are still pumping at a fast pace, exacerbating the global glut.
Brent crude for delivery in June fell 0.5% to $63.12 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures traded down 0.3% at $56.20 a barrel.
Oil prices have risen in nine of the last 11 trading sessions but are still off more than 40% from last summer's peak.
"While the shift in sentiment isn't necessarily flawed, the swing to the extreme is overdone," said analysts at London-based consultancy Energy Aspects. "There are still plenty of stocks.. to be run down before markets tighten. Globally, draws don't start until late Q3 15 at the earliest."
Market participants are bracing for the latest U.S. supply data to see if the recent decline in weekly production will be sustained.
The American Petroleum Institute, an industry group, will release its own inventory data later Tuesday. Official data from the U.S. Energy Information Administration is due April 22.
Market observers are also starting to speculate whether the Organization of the Petroleum Exporting Countries will make any changes to its stance of maintaining oil production levels at its next meeting in June.
Key OPEC members like Saudi Arabia and Iraq have been increasing their production in recent months, leading the organization to overshoot its own target output of 30 million barrels a day.
According to J.P. Morgan oil prices have stabilized and that the medium-term outlook has improved substantially since the beginning of the year.
But the bank cautions that "near-term price volatility could persist as supply from the Middle East is expected to remain high, with Saudi Arabia and Iraqi production on the rise."
J.P. Morgan sees Brent averaging $59 a barrel this year and rising to $62 a barrel in 2016. U.S. oil prices would average $52 a barrel this year and rise to $54 in the next, the bank says.
Nymex reformulated gasoline blendstock for May--the benchmark gasoline contract--fell 0.6% to $1.9189 a gallon, while ICE gas oil for May changed hands at $571.50 a metric ton, down $2.50 from settlement of April 20.