Oil Price Update
Brent crude speculators raised their net long positions by 1,056 contracts to 143,039 in the week to Jan. 27, ICE said on Monday, as some investors took the view that the oil price was beginning to bottom out.
Both contracts rallied about 8 percent on Friday, fuelled by month-end short-covering and a record weekly drop in the number of U.S. oil rigs employed, according to industry data from Baker Hughes. The count is down 24 percent from its October peak.
“Most market observers have been surprised by the scale of the decrease, and expectations of U.S. oil output this year will no doubt be lowered accordingly,” analysts at Commerzbank said in a note. “The foundation for a steady price recovery in the second half of the year has thus been laid.”
However, in the short term the price increase has been exaggerated as there is still considerable oversupply, they said.
In the United States, union workers were on strike for a second day on Monday at nine refineries and chemical plants as they sought a new national contract with oil companies covering labourers at 63 plants.
This boosted refined oil products prices in the United States and Europe, as traders anticipated more arbitrage opportunities opening up to the west.
“Values are following through to the upside this morning as U.S. product markets gather additional bullish momentum off of labour strikes at several U.S. refiners,” Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note.
“While this news is theoretically bearish to the crude market, WTI is still getting pulled higher.”
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