Tags: oil | crude | selloff | rally

Oil Extends Rally Amid Speculation That Selloff Was Excessive

Thursday, 18 December 2014 07:20 AM

Oil headed for its biggest gain in more than two weeks in New York amid speculation that crude’s plunge to a five-year low may have been excessive.

Futures rose as much as 4 percent in New York following an increase of 1 percent yesterday. Oil extended gains after Ali Al-Naimi, Saudi Arabia’s oil minister, said the global economic slowdown has contributed to a temporary “problem” in the market, according to a Saudi Press Agency report. The contract’s 14-day relative strength index is at 26.9, below the 30 level traders view as a signal prices may be oversold.

“The oil market is way oversold and due for a rally,” Amrita Sen, chief analyst at London-based consultants Energy Aspects Ltd., said by e-mail. “Given the scale of price drop, demand growth could surprise significantly to the upside.”

West Texas Intermediate for January delivery rose as much as $2.26 to $58.73 a barrel in electronic trading on the New York Mercantile Exchange. It gained $1.62 to $58.09 at 11:39 a.m. London time. A close at that level would mark the biggest advance since Dec. 1. The more-active February future climbed $1.55 to $58.34. Total volume was about 80 percent above the 100-day average for the time of day. Prices have decreased 41 percent this year, heading for the biggest annual slide since 2008.

Brent for February settlement rose $1.77, or 2.9 percent, to $62.95 a barrel on the London-based ICE Futures Europe exchange. It increased 2 percent yesterday. The European benchmark crude traded at a premium of $4.62 to WTI for the same month.

Temporary Problem

Saudi Arabia, the largest producer in OPEC, will stick to its policy to maintain output, Al-Naimi said, according to the agency.

“It is difficult if not impossible for the kingdom or OPEC to carry out any measure that would lead to a decrease in its market share or the increase of others’ market share,” he said.

President Vladimir Putin said Russia shouldn’t waste currency reserves protecting the ruble as the country braces for a recession brought on by the collapse of the oil price and sanctions over the Ukraine conflict.

“Under the most negative external economic scenario, this situation can last two years,” Putin said today at his annual press conference in Moscow. “If the situation is very bad, we will have to change our plans, cut some things.”

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Oil headed for its biggest gain in more than two weeks in New York amid speculation that crude's plunge to a five-year low may have been excessive.
oil, crude, selloff, rally
Thursday, 18 December 2014 07:20 AM
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