[NEW YORK] Oil prices rose strongly again on Monday, tacking on a total of 11 per cent over two straight sessions, as some investors bet that a bottom had formed to the seven-month long rout on the market even as others remained pessimistic.
Benchmark Brent and US oil futures swung in a band of about US$4 a barrel, one of their widest in weeks, as near-term technical signals indicated further gains while fundamental data continued to weigh on the market. "We could get a pretty good bear market correction here to really mess up all the new shorts," said Walter Zimmerman, chief technical analyst at United-ICAP in Jersey City, New Jersey. "In fact, at this point, I would rather just take profits on shorts and resell if the price low is broken, then just adding to shorts. I absolutely do not want to be adding to shorts down here." Zimmerman said Brent could rise to over US$61 a barrel and US crude above US$59 as oil prices snap out of oversold territory for the first time in months on concerns that falling US oil rig counts may rein in a market glut.
The spread between Brent and US crude widened to above US$5 a barrel, its widest since November. "I don't think anything's changed fundamentally, except for the psychology of the market," said Chandravir Ahuja, an analyst at Kolmar Americas Inc in Bridgeport, Connecticut. "We're moving a lot more on headlines that we probably would on a normal day." Brent settled up US$1.76, or 3.3 per cent, at US$54.75 a barrel, swinging between a session high of US$55.62 and a low of US$51.41.
US crude closed up US$1.33, or 2.8 per cent, at US$49.36 a barrel, moving between US$50.56 and $46.67.
The rally came despite oil services company Genscape estimating a stock build of 2.3 million barrels in the Cushing, Oklahoma, delivery point for US crude last week, adding to already record-high inventories in the United States.
A US refinery strike, which theoretically meant higher crude supplies in the market, along with disappointing US consumer spending and manufacturing data, also failed to keep oil prices down.
Prices jumped about 8 per cent on Friday, the biggest daily gain since 2009 for Brent, after data showed the number of US oil drilling rigs had fallen the most in a week in nearly 30 years. Month-end covering by traders taking profits on earlier short positions added to the rally.
Speculators in Brent had raised their net long positions by 1,056 contracts to 143,039 in the week to Jan 27, exchange data showed on Monday, as some took the view that prices were stabilizing from the sell-off that began in the summer.