Oil Tops $60 For First Time In 2015; Oversupply Persists
Published 2015-02-14 07:40:12| Amwal Al Ghad English
Oil closed up for a second straight week on Friday after another drop in the U.S. rig count, and Brent crude hit a 2015 high above $60 a barrel, but market skeptics cautioned the rally could fade because supplies keep coming. Many traders and analysts believe there is a global oversupply of nearly two million barrels per day of crude oil.They say little has changed fundamentally to explain the price rebound of the past two weeks. The number of oil drilling rigs in the United States fell this week to its lowest since August 2011, data showed on Friday. But the market's reaction was relatively tepid compared with the past two weeks when prices spiked on declining rig counts. "I think people are starting to understand to a certain point that, even if rig counts go down, it's not going to affect production in the short term. It's going to take a few months for that to happen," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York. U.S. crude inventories have swelled to record highs of nearly 418 million barrels, government data showed last week.
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Gold prices fell the most in more than three weeks and the Swiss franc dipped slightly on Monday after Swiss voters overwhelmingly rejected proposals to boost gold reserves in a referendum. The measure, had it been approved, would have compelled the Swiss National Bank (SNB) to more than double its gold reserves and banned it from ever selling the metal, threatening its ability to defend a 1.20 euro cap on the Swiss franc imposed at the height of the euro zone crisis. Gold fell more than two percent to $1,142.91 per ounce, its lowest level in more than three weeks, while silver also took a hit, falling more than six percent to a five-year low of $14.42 per ounce. The Swiss franc dipped to 1.2042 on the euro from 1.2018 at the end of last week. It last stood at 1.2036. "The result should of course temporarily relieve the pressure on the SNB's currency floor, albeit whilst doing little or nothing in our opinion to reverse the fundamental downward trajectory of EUR/CHF," said JPMorgan analyst Paul Meggyesi. Oil prices hit new four-year lows, unable to find a bottom despite their biggest fall in 2 1/2 years last week after OPEC resisted cuts to output in the face of a supply glut. U.S. crude fell more than two percent to a four-year low $64.62 per barrel after a 13.5 percent last week. That marked a 40 percent decline from their peak in June. Sliding oil prices have stirred deflation fears in the euro zone and Japan, cementing expectations that the European Central Bank and the Bank of Japan will take more steps to support their respective economies. The dollar, taking advantage of such concerns, attracted bids against the euro and yen. The euro was slightly weaker at $1.2441 after having fallen on Friday on data showing annual inflation in the euro zone cooled to five-year lows of 0.3 percent in November. Many traders expect the ECB may signal further action to ward off deflation later this week. The dollar also gained 0.2 percent in early trade to 118.81 yen, coming within sight of testing its seven-year high of 118.98 set on Nov. 20. The dollar index, which measures the greenback against a basket of major currencies, rose to 88.316, near four-year highs of 88.44 set on Monday last week. In Asia, falls in energy and raw material prices look set to hurt assets that are tied to the resource sector, including from Australian mining shares to the Malaysian ringgit. Australian shares dipped 0.2 percent in early trade, helping to push down MSCI's broadest index of Asia-Pacific shares outside Japan 0.3 percent. Nikkei futures in Chicago traded about 0.3 percent below Friday's local closing levels but traders say Japanese shares could benefit from both the fall in the yen and oil. Indeed, shares of some of the other oil consuming economies could gain after Wall Street shares rose for a sixth straight week, as strength in consumer names offset falls in energy shares. U.S. debt yields have fallen to six-weeks low of 2.166 percent on Friday as the fall in oil prices cooled inflation expectations.
Crude oil rose sharply on Friday as Brent and U.S. futures posted their first monthly gains since June, supported by an improving demand outlook and supply outages. On its way to contract expiration, March New York ultra-low sulfur diesel (ULSD) gained more than 7 percent in volatile trading, and the 36 percent February increase was the biggest percentage monthly rise in 15 years. Brent crude LCOc1 rose $2.53 to $62.58 a barrel. February's 18 percent gain was the biggest monthly percentage rise since May 2009. U.S. crude CLc1 rose $1.59 to settle at $49.76, managing a 3.1 percent February gain. Both Brent and U.S. futures briefly pared gains after Baker Hughes Inc (BHI.N) data showed its U.S. oil drilling rig count fell only 33 to 986 this week. U.S. crude gains have been curbed by rising crude oil inventories in the United States, up 8.4 million barrels last week, according to government data. [EIA/S] Money managers cut their net long U.S. crude futures and options positions in the week to Feb. 24, the U.S. Commodity Futures Trading Commission (CFTC) said Friday. Both contracts have been supported by signs that lower prices are starting to reduce investment in non-OPEC production, even as the U.S. rig count slide slows. Brent's more pronounced February gains have been fueled by disruptions to production and exports from Libya and Iraq. "The main event this week has been the widening of the spread between Brent and WTI (U.S. crude)," said Ole Hansen, senior commodity strategist at Saxo Bank. The spread between Brent and U.S. crude CL-LCO1=R was as wide as $13 a barrel on Friday, the highest Brent premium since January 2014. Brent has also received support from strong U.S. refined products futures. "Cold weather and refinery problems and tight supplies on the East Coast have helped make the ULSD contract the most sensitive part of the oil sector," said Robert Yawger, director for energy futures at Mizuho Securities USA in New York. March ULSD HOH5 rose 16.31 cents to settle at $2.2989 a gallon, after reaching $2.3325, a 2015 peak and the highest since November. March's premium HOc1-HOc2 to April HOJ5 ULSD swung from 22.35 cents a gallon to 37.69 cents on Friday. March RBOB gasoline RBc1 rose 6 cents to settle at $1.7676 a gallon, going off the board above RBOB's 100-day moving average of $1.7658. Both products posted the first monthly gains since June.
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