Oil prices rose on Monday extending a rebound that started late
last week, a trend analysts have attributed to traders closing
short positions and looking for end-of-year bargains rather than a
change in fundamentals.
The price of crude nearly halved since a peak in June as fears
about a mismatch between ample supply and tepid demand engulfed the
market. The fall was further exacerbated by a decision of the
Organization of the Petroleum Exporting Countries last month to
keep its output levels unchanged.
On Sunday, Persian Gulf oil officials defended that decision,
blaming non-OPEC producers for the current oil market glut.
Brent crude for February delivery was up about 1.5% to $62.30 a
barrel on London's ICE Futures exchange. Nymex traded light, sweet
WTI crude futures were up $1.20 to $57.80 a barrel in electronic
trading.
"It is natural, after such price drops, to witness some bargain
hunting, some testing of technical levels, but nothing
fundamentally has changed" said Torbjørn Kjus, oil analyst at DNB
Markets. "We also saw such rebound in the end of November and it
didn't last."
Speaking at an energy conference in Abu Dhabi on Sunday, Saudi
Arabia's oil minister, Ali al-Naimi, blamed a lack of coordination
among non-OPEC producers, along with speculators and misleading
information, for the price slump.
According to Mr. Naimi, who is OPEC's secretary-general and it
is most influential voice, the current oil market situation is
temporary and prices will rebound.
Oil prices had plummeted since OPEC decided on Nov. 27 to keep
its production ceiling unchanged.
"With Saudi Arabia pledging its commitment to seeing stability
in oil prices, many took this as a catalyst for a recovery," Stan
Shamu of IG wrote in a note. "However, the problems oil is facing
certainly seem deeper than that and I suspect we haven't put the
recent volatility behind us just yet."
Last week provided a practical primer on volatility with a
pattern emerging in which early gains have been whittled away over
the course of the day. On Thursday, crude had rallied by as much as
3% in early trade only to see the gains pared as negative sentiment
overwhelmed the market.
Despite a rally on Friday, the price WTI crude fell 2.23% for
the week, the fourth consecutive week of declines. During those
four weeks WTI lost 26.13%--the largest percentage decline for that
time period since the week ended Dec. 26, 2008.
The early gains on Monday could suffer the same fate, analysts
say.
"After the bears dug themselves through various psychological
support levels over recent weeks, there finally appears to be some
signs a floor might have been located in the oil markets," Jameel
Ahmad, chief market analyst at FXTM, wrote in a note. "While the
oil markets locating a floor would breathe a sigh of relief by
those impacted by lower oil prices, this could also be a
consolidation period before the next potential leg lower."
Nymex reformulated gasoline blendstock for January--the
benchmark gasoline contract--rose 1.36% to $1.5807 a gallon, while
ICE gas oil for January changed hands at $559.25 a metric ton, up
$10.50 from Friday's settlement.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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