Oil
rises 6 pct but set for biggest January fall in 25 years
Send a link to a friend
[January 22, 2016]
By Amanda Cooper
LONDON (Reuters) - Oil rose by more than 6
percent on Friday, as a cold snap boosted demand for heating oil across
the United States and Europe, but was still mired near its lowest since
2003 and set for its largest January drop in at least 25 years.
|
Crude futures were poised for their first weekly gain this year, but
analysts said there had been no shift in the fundamental backdrop of
supply far exceeding demand and swelling inventories of unwanted oil
and oil products.
The oil price is set for a 16.8-percent fall in January, its largest
slide in the first month of the year in at least a quarter century.
"There is no fundamental justification whatsoever to think that the
current downtrend is changing," said PVM Oil Associates analyst
Tamas Varga.
"All one has to do is look at this month's report from the IEA to
see that, especially the first half of this year, the market is
going to be oversupplied," he said, referring to a report by the
Paris-based International Energy Agency.
Brent was up $1.92 at $31.17 a barrel by 1200 GMT, off this week's
2003 low of $27.10 and heading for a more than 6 percent weekly
gain, while U.S. crude rose $1.59 to $31.12.
In its monthly report on Tuesday, the IEA said oil supply would
outpace demand for at least another year and the oil market risked
"drowning in oversupply".
That said, this week traders have bought a raft of derivatives
giving them the option to buy oil at $40 a barrel by December,
suggesting that the worst of the rout may be over for now.
Freezing weather conditions and snowstorms have gripped the U.S.
East Coast and parts of continental Europe, feeding demand for
heating oil and helping to boost oil.
[to top of second column] |
Threatening oil's ability to build on its gains was the
comparatively mild rally that took place in the longer-dated Brent
futures contracts.
Prices for oil for delivery in one year's time rose by a mere 2
percent on the day, compared to the near-7 percent rise in prices
for prompt delivery, narrowing the difference, or contango, between
the two.
"This is not a sustainable rally given the current surplus ...
Either the longer-dated contracts need to be lifted along with the
front-end rally or the front-end rally needs to fade and fall back,"
SEB analyst Bjarne Schieldrop said in a note.
(This story has been refiled to clarify to read largest January
drop, paragraph 1)
(Additional reporting by Roslan Kwasawneh in SINGAPORE; Editing by
David Evans and Adrian Croft)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
|