Oil mar­ket storm clears as prices sta­bi­lize on out­put deal

The Pak Banker - - MARKETS/SPORTS -

Oil is pulling away from the mar­ket's big­gest storm in seven years. A mea­sure of price volatil­ity has tum­bled from the high­est level since Jan­uary 2009 as the mar­ket frenzy eases amid a po­ten­tial pact be­tween the world's largest pro­duc­ers to freeze out­put.

In­vestors in Fe­bru­ary fix­ated on how and when Saudi Ara­bia would en­gage other pro­duc­ers clam­or­ing for a way to boost prices. Crude in New York crashed by about half since the big­gest pro­ducer in the Or­ga­ni­za­tion of Pe­tro­leum Ex­port­ing Coun­tries led the group's 2014 de­ci­sion to not to cut out­put in the face of a global glut, opt­ing in­stead to keep taps open to force out higher-cost ri­vals. From the "suc­cess­ful" talks be­tween Saudi Ara­bian Oil Min­is­ter Ali al-Naimi and his Venezue­lan coun­ter­part early last month, to the Feb. 16 SaudiRus­sia out­put freeze an­nounce­ment, to Iran's re­jec­tion of the plan as "ridicu­lous," the CBOE Crude Oil Volatil­ity In­dex av­er­aged the high­est level since 2009. Since the pact was an­nounced, the mea­sure of ex­pec­ta­tions of price swings has tum­bled to the low­est in al­most two months while oil has gained about 18pc to trade near $35.

"Since the Saudis and Rus­sia reached an agree­ment to freeze out­put, volatil­ity in the mar­ket has eased and oil prices have sta­bi­lized with the fo­cus shift­ing back to fun­da­men­tals," said Hong Sung Ki, a se­nior an­a­lyst at Sam­sung Fu­tures Inc. "More sta­ble oil prices are ex­pected in the com­ing months, pos­si­bly up to the $40 level, at least un­til the next OPEC meet­ing in June." U.S. bench­mark West Texas In­ter­me­di­ate crude has climbed more than 30 per­cent since drop­ping to the low­est level in 12 years last month, and was at $34.45 a bar­rel at 9:20 a.m. Lon­don time. Ag­gre­gate trad­ing vol­umes have de­clined from a record high reached Feb. 11 while ag­gre­gate open in­ter­est has de­creased from a Fe­bru­ary peak.

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