Oil Steady Around $73 As Rally Sputters

Brent crude oil steadied below $73 a barrel on Tuesday, holding onto a rally from five-year lows after oil producers failed to curb production despite a supply glut.

“The market is trying to find some equilibrium,” said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.

“There was a sharp drop last week and a rebound yesterday. Brent is trying to find out if it is going to be trading at the $60 to $70 range or $70 to $80.”

 
Brent was unchanged at $72.54 by 0935 GMT (4.35 a.m. EST), after jumping 3.4 percent on Monday. U.S. crude was down 40 cents at $68.60 a barrel.

Oil has fallen by more than a third since June and on Monday reached it lowest since October 2009 as huge new supplies of high quality, light oil from North America overwhelmed demand.

The Organization of the Petroleum Exporting Countries had been expected at a meeting last week to trim output to try to rebalance the market, but could only agree to maintain existing production targets.

Analysts said the market was going through a volatile adjustment phase that would lead to more erratic price movements before a more stable pricing environment was found.

“Saudi Arabia and OPEC no longer have the mechanism to balance markets from the supply side,” said Mark Keenan, head of commodities research Asia at Societe Generale.

The bank cut its U.S. crude and Brent forecasts to an average of $65 and $70, respectively, for 2015 and 2016.

via Reuters

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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