After a quick drop of $3-4 a barrel the week before last, oil prices steadied last week as the markets contemplated just how effective the OPEC/NOPEC production freeze will be in the short term. Speculators had enthusiastically embraced the production freeze when it was announced late last year and drove open interest in futures to record highs. The cuts, however, did not come fast enough or be deep enough to offset increasing oil production from other countries and lower demand. As one important trader put it, “The OPEC cuts were good enough to prevent a repeat of the glut of last year, but it’s a different story if you want to have oil at $60 or $70.” For now, the physical oil market continues to indicate an oversupply situation.
Archive for April, 2013
“After a three-day rebound in reaction to the selloff the week before last, oil prices fell again on Thursday and Friday on bad economic news from the US, the EU, and possibly China. This time prices fell faster in the US than in London, widening the WTI-Brent spread back to nearly $12 a barrel at the close. With demand weak in the US and EU, and few signs of improvement in the near future, oil prices may push below $90 in New York and $100 in London…”
“Oil prices underwent their biggest weekly drop in six months last week as US employment numbers came in far worse than analysts had expected, US crude inventories increased to a 22-year high, and the EU’s unemployment rate rose to a record. At week’s end Brent crude was down to $104.12, the lowest in eight months, after having traded close to $112 on Tuesday. NY crude closed at $92.70; the 4.7 percent loss for the week was the biggest weekly loss since last September. The Brent-WTI spread continues to narrow and is now below $12 a barrel. So far this year, Brent crude has fallen 6.3 percent while WTI has increased 1 percent…”
“In a short trading week, oil prices rose steadily last week closing at $97.23 in New York and $109.93 in London. NY crude is now only $3 a barrel below the highs seen in mid February, but Brent crude is still $7 below these highs reflecting the tightening of the Brent-WTO spread to the smallest margin since July. Most of the gain last week was attributed to the “settlement” of the financial crisis on Cyprus and the report that the US economy grew by 0.4 percent in the 4th quarter rather than the 0.1 percent than had been expected…”