Oil prices re­bound from sell­off; volatil­ity ex­pected

The Pak Banker - - MARKETS/SPORTS -

Crude oil prices pushed higher on Wed­nes­day af­ter Iran said it was open to co­op­er­a­tion with Saudi Ara­bia, partly re­cov­er­ing from an 8 per­cent fall in the pre­vi­ous ses­sion on con­cerns over de­mand and weak eq­ui­ties.

Liq­uid­ity in Asia re­mained low as China is closed all week due to the Lu­nar New Year hol­i­day, while South Korea was also off on Wed­nes­day and Ja­pan will take a pub­lic hol­i­day on Thurs­day.

Prices were sup­ported by com­ments from Iran's oil min­is­ter that Tehran is ready to ne­go­ti­ate with Saudi Ara­bia over the cur­rent con­di­tions in global oil mar­kets.

Mean­while, the In­ter­na­tional En­ergy Agency (IEA) said the Or­ga­ni­za­tion of Pe­tro­leum Ex­port­ing Coun­tries (OPEC) is un­likely to cut a deal with other pro­duc­ers to re­duce bal­loon­ing out­put. It pre­dicted the world will store un­wanted oil for most of 2016 as de­clines in U.S. oil out­put take time.

"An­other day of height­ened volatil­ity is ex­pected as con­cerns over global growth prospects re­main el­e­vated," an­a­lysts at ANZ said in a note.

The front-month Brent con­tract LCOc1 was up 63 cents, or 2 per­cent, higher at $31.95 a bar­rel by 0800 GMT. The con­tract fell for a fourth straight ses­sion on Tues­day to end down $2.56, or 7.8 per­cent.

U.S. crude for March de­liv­ery CLc1 was 54 cents higher at $28.48 a bar­rel. The con­tract fell 5.9 per­cent on Tues­day to set­tle $1.75 lower.

Seek­ing pro­tec­tion against wild swings in prices, oil traders have scram­bled to scoop up op­tions, send­ing a key volatil­ity in­dex CLATMIV to its high­est level since the worst of the global eco­nomic cri­sis in 2008, data showed. Oil in­vestors will turn to weekly in­ven­tory data by U.S. En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) later on Wed­nes­day, with an­a­lysts sur­veyed by Reuters pre­dict­ing a 3.6 mil­lion-bar­rel rise in crude stocks last week.

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