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Wan LixinOpinion deputy editor of Shanghai Daily
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Oil rallies late to hold on to early price gains
Source: Agencies |
March 4, 2009, Wednesday
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Online Edition
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OIL prices rose in volatile trading yesterday, partially offsetting an enormous sell-off that started the week.
Benchmark crude for April delivery rose US$1.50 to settle at US$41.65 a barrel on the New York Mercantile Exchange. In London, Brent crude rose US$1.49 to settle at US$43.70 on the ICE Futures exchange.
Crude prices have made modest recoveries after large downward movements in recent weeks, but the trend still is lower. The price for U.S. benchmark crude is down 6 percent from its opening Monday.
"There is nothing to get excited about from a demand standpoint," said analyst and trader Stephen Schork.
But it also does not look like prices are headed much lower, he said. Investors also understand how bleak the economy is and the unemployment picture.
"It's all been priced in," he said.
Yesterday the National Association of Realtors said pending home sales sank to a new low in January. The group's seasonally adjusted index of pending sales contracts fell 7.7 percent to 80.4 in January from a downwardly revised December reading of 87.1. January's reading was far worse than the 85.1 economists expected, according to Thomson Reuters, and came in below the previous record low of 83.1 in November.
"The housing numbers were terrible," said Phil Flynn of Alaron Trading Corp.
Two hours later, Ford Motor Co. reported its U.S. sales fell 48 percent in February with consumers turning down even huge rebates and low-interest financing.
Traders awaited Wednesday's release of crude inventory data by the Energy Information Administration.
Analysts are looking for oil stocks to rise by 2.2 million barrels, and gasoline stocks to fall by 600,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Oil prices have fallen below US$33 twice in the past three months as oil inventories neared record levels.
Markets watch inventory levels closely for signs of rising or falling demand. Oil prices rose for two consecutive days last week when the build up in crude inventories was less than expected.
But prices began to fall on Friday and then plunged Monday. Crude is still trading about US$4 below Monday's open.
Traders are also awaiting government reports later this week on employment levels, which have in recent months sent oil prices plunging further.
The nation has lost 3.6 million jobs since the recession started, including 598,000 jobs in January alone, the most since 1974. The jobless rate surged to 7.6 percent in January, and economists and government officials all agreed the toll is certain to go higher.
That has driven down demand for oil, and by extension gasoline, as more people stop commuting to work.
The Organization of Petroleum Exporting Countries, which accounts for 40 percent of the world's production, has cut production by 4.2 million barrels a day to help support prices. The 12-country cartel plans to meet March 13 and may make further cuts.
Without providing specifics, Iran's official news agency said yesterday that the country's oil minister would propose ways to boost prices at the meeting in OPEC's Vienna headquarters.
Gholam Hossein Nozari was quoted as saying that the group's compliance with the cuts stood at about 80 percent and said it was ready to slash output by 500,000 to 600,000 barrels per day to fulfill its promise.
In other Nymex trading, gasoline for April delivery rose 3.32 cents to settle at US$1.3194 a gallon, while heating oil gained 2.84 cents to settle at US$1.1796 a gallon. Natural gas for April delivery rose 13 cents to settle at US$4.282 per 1,000 cubic feet.
Benchmark crude for April delivery rose US$1.50 to settle at US$41.65 a barrel on the New York Mercantile Exchange. In London, Brent crude rose US$1.49 to settle at US$43.70 on the ICE Futures exchange.
Crude prices have made modest recoveries after large downward movements in recent weeks, but the trend still is lower. The price for U.S. benchmark crude is down 6 percent from its opening Monday.
"There is nothing to get excited about from a demand standpoint," said analyst and trader Stephen Schork.
But it also does not look like prices are headed much lower, he said. Investors also understand how bleak the economy is and the unemployment picture.
"It's all been priced in," he said.
Yesterday the National Association of Realtors said pending home sales sank to a new low in January. The group's seasonally adjusted index of pending sales contracts fell 7.7 percent to 80.4 in January from a downwardly revised December reading of 87.1. January's reading was far worse than the 85.1 economists expected, according to Thomson Reuters, and came in below the previous record low of 83.1 in November.
"The housing numbers were terrible," said Phil Flynn of Alaron Trading Corp.
Two hours later, Ford Motor Co. reported its U.S. sales fell 48 percent in February with consumers turning down even huge rebates and low-interest financing.
Traders awaited Wednesday's release of crude inventory data by the Energy Information Administration.
Analysts are looking for oil stocks to rise by 2.2 million barrels, and gasoline stocks to fall by 600,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Oil prices have fallen below US$33 twice in the past three months as oil inventories neared record levels.
Markets watch inventory levels closely for signs of rising or falling demand. Oil prices rose for two consecutive days last week when the build up in crude inventories was less than expected.
But prices began to fall on Friday and then plunged Monday. Crude is still trading about US$4 below Monday's open.
Traders are also awaiting government reports later this week on employment levels, which have in recent months sent oil prices plunging further.
The nation has lost 3.6 million jobs since the recession started, including 598,000 jobs in January alone, the most since 1974. The jobless rate surged to 7.6 percent in January, and economists and government officials all agreed the toll is certain to go higher.
That has driven down demand for oil, and by extension gasoline, as more people stop commuting to work.
The Organization of Petroleum Exporting Countries, which accounts for 40 percent of the world's production, has cut production by 4.2 million barrels a day to help support prices. The 12-country cartel plans to meet March 13 and may make further cuts.
Without providing specifics, Iran's official news agency said yesterday that the country's oil minister would propose ways to boost prices at the meeting in OPEC's Vienna headquarters.
Gholam Hossein Nozari was quoted as saying that the group's compliance with the cuts stood at about 80 percent and said it was ready to slash output by 500,000 to 600,000 barrels per day to fulfill its promise.
In other Nymex trading, gasoline for April delivery rose 3.32 cents to settle at US$1.3194 a gallon, while heating oil gained 2.84 cents to settle at US$1.1796 a gallon. Natural gas for April delivery rose 13 cents to settle at US$4.282 per 1,000 cubic feet.
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