Acute oversold status:Oil Rises From 19-Month Low as Indicator Shows Prices May Climb
bloomberg.com
By Christian Schmollinger
Jan. 12 (Bloomberg) -- Crude oil rose from a 19-month low in New York as technical indicators used by traders showed prices may have fallen too far, too fast.
The 30-day relative strength index, which attempts to identify possible turning points in prices, fell to 34.7 yesterday, the lowest since Oct. 20. On that occasion, prices rose for the following three days. Oil's decline below $53 is ``unacceptable'' and OPEC members must comply with their production cuts, group president Mohamed al-Hamli said yesterday.
``Oil is technically oversold, no doubt about that,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``There will be some action by OPEC to stem the decline.''
Crude oil for February delivery rose as much as 86 cents, or 1.7 percent, to $52.74 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $52.59 at 2:47 p.m. in Singapore, snapping a four-day decline. Futures had fallen 6.6 percent this week.
Yesterday, the contract fell $2.14, or 4 percent, to $51.88 a barrel, the lowest close since May 27, 2005. Prices touched $51.80, yesterday and are down 15 percent so far this year.
The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world's oil, decided in the fourth quarter to cut output by a total of 1.7 million barrels a day by Feb. 1. Consultations among ministers about falling prices are ``ongoing,'' Al-Hamli said yesterday.
Over Quota
The 10 OPEC members with production quotas pumped 385,000 barrels a day more oil than their agreed target last month, according to Bloomberg data.
``Saudi Arabia should have enough clout to exert pressure on the other members,'' said CFC Seymour's Kowalczyk. ``It's clear that non-compliance is hurting everybody''
Crude oil may fall toward $50 a barrel as plunging U.S. fuel consumption bolsters stockpiles in the world's biggest energy consumer, according to a Bloomberg News survey.
Twenty of 47 analysts, traders and brokers, or 43 percent, said prices will decline next week. Eleven expected an increase and 16 forecast little change. Last week, 48 percent said crude oil would drop.
U.S. crude oil stockpiles held 314.7 million on Jan. 5, or 7.1 percent higher than the five-year average for the week, the U.S. Energy Department said Jan. 10. Daily fuel demand, based on deliveries from refineries, averaged 20.4 million barrels in the four week period, 4.2 percent less than a year earlier.
Oil Demand
World oil demand peaks in the fourth quarter when refiners make heating oil for the northern hemisphere winter. Mild weather in the U.S. Northeast, the nation's biggest heating oil consuming region, has cut average distillate demand to 4.2 million barrels a day the past four weeks, 2.6 percent less than a year ago, the department said.
In London, Brent crude oil for February settlement rose as much as 84 cents, or 1.6 percent, to $52.54 a barrel in electronic trading on the ICE Futures exchange. It was at $52.48 at 2:47 p.m. Singapore time.
The relative strength index calculates the degree a security's daily gains outpace its daily losses over a given period, or by how much losses outpace gains. A reading near 70 suggests a security may be poised to fall. A reading near 30 indicates it may be poised to rise.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net |
