Oil Edges up Slightly in Second Straight Day of Gains

20 Apr

Brent crude oil prices closed below USD 100 a barrel on a second day of modest gains on Friday, after surpassing USD 100 earlier in the session and recovering some ground after a steep six-day decline.

Brent has fallen nearly 10 percent since the beginning of April, a decline that accelerated earlier this week after a cut in oil demand forecasts by global energy agencies and weak economic data from the United States and China, the world’s two largest oil consumers.

Friday marked the second day of gains for Brent after it closed at USD 97.69 on Wednesday, the lowest level since July 2012 and a price that analysts said was attractive to bargain hunters.

Analysts said the market seemed to be stabilizing after a week of heavy liquidation in which prices tumbled from over USD 103 as of last Friday, along with a rout in gold and industrial metals.

“Today’s gains looked like a follow-up to yesterday’s correction and one that could possibly be maintained for a couple more sessions,” Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois, wrote in a research note.

Brent crude settled up 52 cents a barrel at USD 99.65, down from an intraday high of USD 100.33. US crude gained 28 cents to settle at USD 88.01.

The May US crude contract expires Monday, April 22.

Most USD  stocks rose on Friday, taking the oil complex with them. USD  equities back a day after the S&P 500 closed below its 50-day moving average for the first time this year, with help from some blue-chip tech names.

“This remains a market very much driven by the equity markets. They’ve been rebounding and we’re just knocking along with that,” said Kyle Cooper, managing director of research at IAF Advisors in Houston, Texas.

“Crude inventories are at an all-time high, but we’re up today,” he added. “There are some people who want to believe it’s a physical market, but it’s not. It’s a financial market.”

Yet worries about global demand and oversupply persist, and market participants remained cautious as to whether the recovery had legs. Front-month oil prices have fallen more than 3 percent for the week.
“Oil prices were technically oversold so we are seeing some buyers coming in but they are not great volumes,” said Rob Montefusco, an oil broker at Sucden Financial in London. “There is nothing to suggest we can go up on a sustained basis – we were just overdone on the downside.”

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After spending the week below 30 on the relative strength index (RSI), a technical momentum indicator, Brent crude poked its head above 30 on Friday.

A reading of 30 or below indicates an oversold condition to chart-watching traders.

Data released during the week contributed to falling prices. Chinese first-quarter GDP growth was seen as disappointing, down at 7.7 percent from 7.9 percent in the fourth quarter. In the United States, the number of people filing new claims for unemployment benefits rose last week, and factory activity in the nation’s mid-Atlantic region cooled in April.

Oil prices are down more than USD 10 a barrel from the start of this month. Brent touched its lowest level since July 2012 on Thursday at USD 96.75 a barrel after commodities took a hammering across the board earlier in the week.

Earlier in the week gold suffered its worst two-day fall in 30 years. Copper is still down below USD 7,000 a tonne, on course for its worst week since 2011.

But with the exception of industrial metals, the complex now appears to have stabilized. “There is a general feeling in the market that Brent won’t go much below USD 100 at this stage as a lot of speculative length has now been liquidated,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The USD 100 level is seen as critical, because it is a budget breakeven point for OPEC members such as Iran, Iraq and Algeria.
“OPEC doesn’t want to see the price fall much below USD 100, and given that they continue to produce at very high levels, they can just turn the taps down a little bit, which would quickly change the balance in the market,” Hansen said.

Iran and Venezuela have already raised concerns about the price fall and said discussions had taken place over whether to call an emergency OPEC meeting before the group’s scheduled meeting at the end of May.

Source: moneycontrol

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2 Responses to “Oil Edges up Slightly in Second Straight Day of Gains”

  1. kittycriston April 20, 2013 at 12:52 pm #

    We can see Crude oil movement which is traded in positive side but there is no high movement from the opening of the trade.

Trackbacks/Pingbacks

  1. Brent crude drops below $100 on weak data from China, US | Trading Tips Expert - May 2, 2013

    […] Crude stocks in the United States rose by 6.7 million barrels last week to a record 395.3 million barrels, data from the Energy Information Administration showed, far exceeding forecasts of a 1 million-barrel build and pressuring US oil prices. […]

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