USA crude prices edge up on short covering, but oversupply still bites
Nov 21 2015
Money managers cut their net long USA crude futures and options positions to the lowest in three months during the week to November 10, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday. Brent crude futures settled down 99 cents at $43.57 a barrel, touching a session low at $43.50.
"People are seeing oil at these very low levels and so they want to step in", said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
"This week's (EIA) data point is unlikely going to relieve the selling pressure on the oil markets, with USA stocks at record levels for this time of year and knocking on the all-time high set earlier in the year", said Jarvis.
"With all of the fundamental signs still pointing to lower prices. The downtrend (is) still the dominant trend in the oil complex", Dominick Chirichella from New York's Energy Management Institute said in an analyst note.
Front-month US crude futures initially rose towards $42 per barrel in early trading but then dipped back to $41.75 a barrel by 0320 GMT, nearly flat with its last settlement.
Please enter your email. The RSI (Relative Strength Index) suggests that crude oil prices are oversold.
"The Paris tragedy may warrant a few upticks in geopolitical premium but this is likely trumped by near-term negative impacts on European oil demand", said Ed Morse, global commodities strategist at Citi in NY. No significant effects on oil supply are expected for the time being, in other words.
Options on US crude expire later on Tuesday, with open interest mostly gathered around put options, which give the seller the right, but not the obligation, to sell USA futures at both $40 and $45 a barrel.
Little has changed since Wednesday, when the U.S. Energy Information Administration reported US crude supplies increased by 300,000 barrels last week.
Big oil suppliers have started requiring prepayment when selling crude and refined products to Venezuela's PDVSA, a bid to curb potential risks from the state-run company's cash flow woes, sources involved in the deals told Reuters.
Oil prices have dropped more than 60 percent since June past year as high production and inventories have coincided with an economic slowdown in Asia, particularly in China but also Japan, which slipped back into recession in the third quarter. Such a collapse has already discouraged major producers from investing in oil production, and there are now concerns that this will eventually lead to a shortage, in turn pushing the prices up.
In related news, oil boosted by smaller than forecast USA stockpile growth.