Oil Rises After Overselling Expectations

West Texas Intermediate and Brent crudes rose on speculation that prices fell more than justified and on concern that the conflict in eastern Ukraine may escalate.

WTI settled at a six-month low yesterday while Brent dropped to the lowest level since June 2013 on signs of weaker demand and ample supplies. Ukraine and Russia clashed over accusations about an alleged border incursion by Russian military vehicles as a humanitarian convoy awaits permission to enter Ukraine.

“The market is oversold so a bit of buying is to be expected,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “The wildcard going into the weekend is the tension between Russia and Ukraine.”

WTI for September delivery rose 38 cents, or 0.4 percent, to $95.96 a barrel at 9:17 a.m. on the New York Mercantile Exchange. Futures are poised for a 1.7 percent weekly loss. The contract dropped to $95.58 yesterday, the lowest settlement since Jan. 21.

Brent for October settlement climbed 61 cents, or 0.6 percent, to $102.68 a barrel on the ICE Futures Europe exchange in London. The September contract expired at $102.01 yesterday, the lowest close for a front-month contract since June 26, 2013. The European benchmark crude traded at a $8.33 premium to the October WTI contract.

The 14-day relative strength index for WTI ended trading at 28.0161 yesterday, according to data compiled by Bloomberg. Investors typically start buying contracts when the reading is below 30, a sign a market is oversold.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza