Oil mar­ket set for more volatil­ity af­ter tur­bu­lent week

The Pak Banker - - MARKETS/SPORTS -

World oil prices swung be­tween sharp gains and losses this week as pos­si­ble ef­forts to fi­nally tackle a sup­ply glut were off­set by lin­ger­ing con­cerns over weak global eco­nomic growth.

"This week's big story [for com­modi­ties] has, of course, been the re­bound in oil prices on un­con­firmed re­ports that Rus­sia and Opec may fi­nally be will­ing to agree co­or­di­nated cuts in out­put," Cap­i­tal Eco­nom­ics an­a­lyst Caro­line Bain said to­day.

"We are scep­ti­cal that any­thing tan­gi­ble will come of this, but it is en­cour­ag­ing that oil has held on to its gains even though of­fi­cials have cast doubt on the spec­u­la­tion." On Fri­day, US bench­mark West Texas In­ter­me­di­ate for de­liv­ery in March was down 17 cents at $33.05 a bar­rel.

Brent North Sea for March rose 30 cents to $34.19 a bar­rel com­pared with Thurs­day's close.

But over the week, Brent rose around 6.0 per cent and WTI gained al­most 3.0 per cent in value. Com­merzbank pointed to con­tin­ued volatil­ity, with an­a­lyst Carsten Fritsch say­ing that while "prices will rise in the long term", it is nec­es­sary to "warn against short-term price falls".

He added in a note to clients: "Af­ter all, Iran and Iraq will soon be open­ing up new sources of sup­ply which will pump ad­di­tional oil onto the mar­ket."

Af­ter strik­ing 12-year low points the pre­vi­ous week, crude fu­tures ral­lied also on hopes of fresh stim­u­lus from the Bank of Ja­pan and the Euro­pean Cen­tral Bank.

In­deed the BoJ de­liv­ered Fri­day by un­ex­pect­edly slash­ing in­ter­est rates into neg­a­tive ter­ri­tory for the first time.

Con­cerns over the poor state of the global econ­omy linger and oil prices tanked in volatile trad­ing this week also on of­fi­cial US data point­ing to weak spots in the world's big­gest econ­omy and con­sumer of oil. The US Depart­ment of En­ergy on Wed­nes­day re­ported that the coun­try's com­mer­cial crude in­ven­to­ries last week jumped 8.4 mil­lion bar­rels to 494.9 mil­lion - the high­est amount on record.

Prices have crashed by about three quar­ters since mid-2014 ow­ing to a sup­ply glut and weaker de­mand growth for crude, as well as a strong dol­lar that makes com­modi­ties priced in the US cur­rency more ex­pen­sive for hold­ers of weaker units.

Crude fu­tures surged Thurs­day how­ever af­ter Rus­sian re­ports that En­ergy Min­is­ter Alexan­der No­vak had said Moscow was ready to take part in talks with Opec to es­tab­lish pos­si­ble "co­or­di­na­tion".

The min­is­ter al­leged that Opec heavy­weight Saudi Ara­bia had pro­posed that oil­pro­duc­ing coun­tries, in­clud­ing non-OPEC Rus­sia, cut pro­duc­tion by up to five per cent, a prospect he said would be dis­cussed at an up­com­ing meet­ing.

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