Investing.com – Has New Year salvation for oil come early?
U.S. West Texas Intermediate crude rebounded forcefully on Wednesday as markets reopened from the Christmas holiday, surging 9% to recoup all of what it lost just before the break, and more.
U.K. Brent crude rallied 8% despite markets in Britain remaining closed for Boxing Day.
The Christmas Eve rout was linked to fears of a potential global economic slowdown and the possibility of a protracted U.S. government shutdown over budget that pushed Wall Street’s to near bear-market territory. U.S. stocks opened lower on Wednesday but rebounded by mid-morning, adding fuel to oil’s recovery.
“It looks like there’s some help for oil now before the year-end because the selloff on Christmas Eve was probably overdone,” said Phil Flynn, senior energy analyst at The Price Futures Group brokerage in Chicago. “But conversely, you can argue that this rebound is also overdone because we just don’t know if the bears will return in force after this.”
Tariq Zahir, an oil bear at Tyche Capital Advisors in New York, suggested that. “I’m selling into this strength as I don’t believe it will sustain,” Zahir said. “It looks like another deadcat bounce, and probably one of the year’s biggest.”
settled up $3.69, or 8.7%, at $46.22 per barrel. It fell $3.06, or nearly 7% on Monday, after hitting June 2017 low of $42.53. Despite the rebound, WTI remains down 24% on the year and is off 40% from four-year highs of nearly $77 a barrel hit in early October.
was up $3.98, or 7.9%, at $54.57 by 2:42 PM ET (19:42 GMT). It fell to an Aug 2017 low of $50.66 on Monday. Brent remains down 18% on the year and is off 37% from four-year highs of nearly $87 a barrel hit in early October.
Funds have incurred heavy losses in oil this year, with the average commodity trading adviser fund, or CTA, down by 7.1 percent on the year through mid-December, Reuters reported, citing Credit Suisse (SIX:) data.
While economic worries have weighed on the market, the outlook for oil is not as weak as in 2016 when a supply glut built up, because OPEC this time was trying to prop up the market, Olivier Jakob, analyst at Petromatrix, was quoted saying.
Saudi-led OPEC and its non-member allies led by Russia agreed in early December to collectively cut production by a total of 1.2 million barrels a day during the first six months of 2019 in an effort to stave off a global glut in supplies.
Should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.
Wednesday’s rebound notwithstanding, traders have braced themselves in recent days for the possibility of WTI hitting below $40 a barrel before the year is out.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Source: Investing.com
