Oil futures declined Tuesday, sliding for a second straight day after a month-long rally ran into technical resistance and doubts as to whether OPEC members and Russia will soon meet for output discussions.
NYMEX April crude settled down 84 cents at $36.34/b. ICE May Brent settled 79 cents lower at $38.74/b.
NYMEX April ULSD settled 1.88 cents lower at $1.1777/gal. NYMEX April RBOB settled down 1.44 cents at $1.4082/gal.
As of last week, crude futures were trading in overbought territory, which could have provoked selling pressure.
A Bollinger Band analysis showed prompt NYMEX crude traded Tuesday far below its upper limit of $39.91/b, though still above its midpoint of $34.45/b.
Calculated on a daily basis, the Bollinger Band's midpoint equals the contract's 20-day moving average, while the upper limit -- which suggests overbought territory -- equals the midpoint plus two standard deviations.
Some traders have decided to book profits and wait until after this week's US Federal Reserve meeting before re-entering the market, said Carl Larry, oil consultant at Frost & Sullivan.
"Each of the last two days' prices were lower and then picked up toward the close, there's not a panic that oil is going back down to $25 a barrel," he said.
In addition, the oil complex has weakened amid uncertainty over the likelihood that OPEC members and Russia will hold a previously announced meeting will discuss production.
"The location, date, and composition of countries participating in the meeting are in a state of flux, and there is little sign that Iran has changed its stance on the freeze," Barclays analysts said in a research note.
Iranian Oil Minister Bijan Zanganeh said Sunday the country should not be included in any production freeze until its production hits 4 million b/d.
The Federal Reserve's two-day policy-setting meeting concludes Wednesday. Although The Fed is not expected to raise interest rates, the central bank could send signals about its future course of action.
"Overnight, the Bank of Japan left its monetary policy unchanged which was not a surprise, but downgraded its assessment of the economy," Price Futures Group analyst Phil Flynn said in a note.
"So if Japan's outlook is weakening and the Fed is looking to raise rates, that is causing some traders to take some [long positions] off of the table," he said.
