Oil up in volatile trading week

Oil up in volatile trading week

Signs of tightening US supplies boost Brent prices to above $58 a barrel

By (AFP)

Published: Sun 8 Feb 2015, 10:18 PM

Last updated: Thu 25 Jun 2015, 7:33 PM

Oil up in volatile trading week

London — World oil prices surged last week after recent heavy losses, aided by signs of tightening US supplies according to analysts. 


Crude futures shot higher in volatile trading as data revealed production cuts that could curb the supply glut. The Baker Hughes North America rig count fell sharply in the week to January 30, dropping by 128 rigs to 1,937. That compared with 2,393 a year ago. Deep cuts in capital spending by major oil companies, including new announcements on Tuesday by BP and BG Group, also suggested there would be tighter supplies in the future.

“A lot of factors are at play. Obviously, the capital spending cuts just keep coming, with BP, and we’re seeing one of the fastest drops of spending across the sector I can remember,” said Phil Flynn of Price Futures Group. Some analysts cautioned the current oil price rebound likely would not last because supplies still far outweigh demand. “Oil... has enjoyed the combination of weakening supply and rising demand fundamentals to maintain its surge,” said Chris Beauchamp, market analyst at trading firm IG.

“Oversupply does not disappear overnight, however, and the jury is still out on whether this bounce (in prices) has much further to run.”

Crude futures were hammered on Wednesday by official data showing another increase in US crude inventories, hitting 30-year highs. WTI shed nearly $5, or almost nine per cent in one day, echoing a price plunge in Brent that was the steepest since November.

Oil prices plunged by about 60 per cent from their June peaks to a six-year low last week, largely owing to a surge in global reserves boosted by robust US shale production. The problem was exacerbated in November after the Opec insisted that it would maintain output levels despite plunging prices. The 12-nation group pumps about 30 per cent of global crude.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in March soared to $58.08 a barrel from $49.65 one week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for March rallied to $50.48 a barrel compared with $45.35. 

Precious metals

Gold dropped further as the shine was taken off its status as a haven following positive US jobs data. US employers kept their doors wide open for new job seekers in January despite a mid-winter slowdown in economic activity, a strong report by the Labour Department showed on Friday. Coupled with a modest gain in wages, the much better-than-expected report suggested the US labour market is beginning to tighten after years of slack, economists said.

“Due to optimism that the Federal Reserve will raise interest rates this year being reaffirmed once again, gold is coming under pressure,” said Jameel Ahmad, chief market analyst at trading group FXTM. By Friday on the London Bullion Market, the price of gold dropped to $1,241 an ounce from $1,260.25 a week earlier.

Silver grew to $17.22 an ounce from $16.92. On the London Platinum and Palladium Market, platinum increased to $1,239 an ounce from $1,221. Palladium advanced to $786 an ounce from $775. 

Base metals

Most industrial metals rose, with copper striking a two-week peak at $5,755 per tonne as monetary policy easing in China stoked hopes of rising demand in the key commodity consumer.

China’s central bank said on Wednesday it would make an across-the-board cut in the percentage of funds banks must hold in reserve, the first such cut in nearly three years as the world’s second-largest economy falters.

The People’s Bank of China said in a statement the reserve requirement ratio would fall by 0.50 percentage points, effective from Thursday. The last time the central bank implemented an across-the-board cut in reserve requirements was May 2012.

“Base metal prices were supported by China’s... cut. We expect copper prices to benefit too,” said Natixis analysts in a note to clients.

By Friday on the London Metal Exchange, copper for delivery in three months rose to $5,677 a tonne from $5,468 a week earlier.

Three-month aluminium rallied to $1,878.50 a tonne from $1,863.50.

Three-month lead increased to $1,860 a tonne from $1,845.

Three-month tin declined to $18,920 a tonne from $19,250.

Three-month nickel gained to $14,920 a tonne from $14,720. 


Futures extended losses. “The outlook for the price of cocoa has deteriorated dramatically over the last month, as recent... data suggest demand is weakening,” said Hamish Smith, commodities economist at consultants Capital Economics.

By Friday on LIFFE, London’s futures exchange, cocoa for delivery in May dipped to £1,911 a tonne compared with £1,917 for the March contract a week earlier.

On the ICE Futures US exchange, cocoa for May climbed to $2,777 a tonne from $2,707 for the March contract the previous week. 


Prices steadied after recent falls caused by strong supplies. “High prices some three years ago stimulated production and the market has had a hard time absorbing this, leading to high stocks” of sugar, said Nick Penney, senior trader at Sucden brokers. By Friday on LIFFE, the price of a tonne of white sugar for delivery in March edged up to $382.50 from $382.40 a week earlier. On ICE Futures US, the price of unrefined sugar for March slid to 14.57 US cents a pound from 14.77 US cents. 


Prices recovered in New York on signs of possible tightness for Brazilian supplies, traders said. By Friday on ICE Futures US, Arabica for delivery in March gained to 166.60 US cents a pound from 159.40 cents a week earlier. On LIFFE, Robusta for March eased to $1,927 a tonne from $1,934.


Kuala Lumpur prices rebounded. By Friday, the Malaysian Rubber Board’s benchmark SMR20 rose to 141.85 US cents a kilo from  138.45 US cents a kilo. 

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