Advertisement
Advertisement

Wow – What Happened To The Crude Oil Rally?

By:
Barry Norman
Updated: Aug 24, 2015, 21:00 UTC

Crude oil had been trading on the upside over the past few days breaking above the $94 price and squeezing the spread against Brent oil to just $3

Wow – What Happened To The Crude Oil Rally?

Wow - What Happened To The Crude Oil Rally?
Wow - What Happened To The Crude Oil Rally?
Crude oil had been trading on the upside over the past few days breaking above the $94 price and squeezing the spread against Brent oil to just $3 signaling a market imbalance. The thought was for traders to push up the prices of Brent oil which was trading well below its average range and its projected range, but the opposite happened. Crude oil tumbled to trade at 91.17 at the close of the month and regained 28 cents this morning to trade at 91.45. Brent Sea oil did gain a few cents to trade at 95.01 with the spread widening to just about $3.50. Oil prices have slumped, with the main US contract falling 3.6 per cent due to worries about a supply glut and the strengthening US dollar.

Traders showed concerns about oversupply following disappointing economic data from key oil-consuming regions. The HSBC China manufacturing purchasing managers’ index came in at a barely-growing 50.2, below the initial reading of 50.5. Eurozone inflation data fell in September to the lowest level since the worst of the financial crisis, while US consumer confidence dropped sharply in September, according to the Conference Board. Japanese industrial production plummeted to a new low at the end of the month.

Addition factors adding to pressure oil included a report by Reuters projecting that OPEC oil production hit a two-year peak in September on strong output from Libya and Saudi Arabia; and a big drop in gasoline prices as a key monthly contract expired. Another reason is that inventory in the US is near a five-year high of 358 million barrels (as on September 25). With shale gas production gaining traction, supplies are also increasing. These have combined to keep crude prices on a leash.  A Reuter’s survey showed OPEC production lifted to two-year high in September.

International oil prices tumbled to their lowest in more than two years to close the month with US crude posting its biggest daily decline since 2012, as a drop in gasoline prices and end-of-quarter selling capped three

gasoline forexwords
months of steep losses. Oil prices in the United States and Europe have plummeted since the end of June as output from the Middle East, Africa and the United States swamped the market and outweighed fears of supply disruptions from war-torn oil-producing regions. Falling gasoline prices and a strong dollar contributed to losses on Tuesday. New York RBOB gasoline for October delivery, which expired Tuesday, fell 4 per cent.

banner_oil_gas

Natural gas ended the month an unexpected level closing at 4.125 in the middle of the conversion from summer air conditioning use to winter heating use. Natural gas is usually found near a seasonal bottom in late September. Prices pulled back slightly after weather forecasts showed warmer expectations than they had the day before. Cold weather should boost demand for home heating, and fears of an early or severe winter have recently made traders jump. Tuesday they balked at how high prices got. Some thought the market was inflated by technical trading in the face of record production.

Crude Oil(4 Hours)20141001061140

About the Author

Did you find this article useful?

Advertisement