Oil Rebounds Slightly After Drop Deemed Excessive

Crude oil rebounded on speculation that a slide in prices to a five-year low was excessive.

Brent, the benchmark for half the world’s oil, gained as much as 5.8 percent after closing at the lowest level since May 2009 yesterday. West Texas Intermediate crude jumped as much as 5.5 percent. Prices slipped earlier after Russia reiterated it will keep production steady and the U.S. Energy Information Administration reported a supply increase at Cushing, Oklahoma.

“We are now finally reaching a point where the market isn’t going completely straight down anymore,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion. “It probably has much less to do with fundamentals and a lot more to do with traders positioning.”

WTI for January delivery rose $2.51, or 4.5 percent, to $58.44 a barrel at 12:15 p.m. on the New York Mercantile Exchange. Prices dropped to $53.60 yesterday, the lowest since May 2009. Total volume traded was 83 percent above the 100-day average for the time of day.

Brent for February settlement gained $3.16, or 5.3 percent, to $63.17 a barrel on the London-based ICE Futures Europe exchange with volume 3.7 percent above the 100-day average. The January contract expired yesterday at $59.86, the lowest settlement since May 2009. Brent traded $4.25 above WTI on the ICE.

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