Oil moves higher to trim year-end losses
New York-traded crude-oil futures managed to recoup some losses in electronic trade early Friday, though rival Brent North Sea crude saw only a modest gain.
Benchmark West Texas Intermediate crude futures for February CLG5, +0.99% improved by 58 cents, or 1.1%, to $53.85 a barrel on Globex, trimming its 1.6% drop in the previous New York Mercantile Exchange session Wednesday.
But London-traded February Brent crude LCOG5, +0.37% rose a slimmer 13 cents, or 0.2%, to $57.46 a barrel, after having lost 1.8% on Wednesday.
The gains on the first trading session of the year offered a positive note for oil futures after their dismal 2014, in which Nymex crude lost 46%.
But Citi Futures energy strategist Timothy Evans said the chances of a real rebound for oil prices would need a strong driver, given the current supply-demand fundamentals and a lack of coordinated effort to reduce output by the members of the Organization of the Petroleum Exporting Countries.
“As we’ve been noting, without a geopolitical event that disrupts supply or a shift in OPEC policy, we don’t envision an abrupt turn higher in oil prices,” Evans wrote.
In terms of geopolitics, Saudi Arabia was in the news after King Abdullah was hospitalized Wednesday, with Reuters citing a source as saying the monarch suffered from “breathing difficulties.” King Abdullah, who has ruled the country since 2005, is believed to be 91 years old, though the Reuters report noted that “official accounts [of his age] are unclear.”
However, Citi’s Evans said that even a new king for the Saudis might be of little consequence for the markets.
“For the most part, we think the Saudis are very much aware of the risks of succession in an absolute monarchy, and that 79-year-old Crown Price Salman would ascend to the throne without incident,” he wrote, but added: “If not, however, it could be a dramatic bullish development.”
Evans also cited some event risk in major oil producer Venezuela, as President Nicolas Maduro is facing “major economic challenges,” including an inflation rate above 60%.
“A change in government, depending on the circumstances, could mean a drop of oil production in the near term, although it could also lead to a more favorable environment for investment that would mean added supply over a longer-term cycle,” he wrote.
Source: MarketWatch – Oil moves higher to trim year-end losses
