Market Close: Dec 01 Up
Dec 1st, 2014 by loren
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U.S. crude-oil futures gained more than 4% Monday, recovering from five-year lows hit last week after OPEC decided to maintain production levels. Light, sweet crude for January delivery rose $2.85, or 4.3%, to settle at $69 a barrel on the New York Mercantile Exchange. That was oil’s largest percentage gain since August 2012, snapping a four-session losing streak. Crude futures plunged 10% on Friday, settling at their lowest level since September 2009 on the first opportunity for U.S. markets to react to the OPEC decision. OPEC on Thursday kept its output the same, dashing hopes of a production cut that many hoped would boost crude prices.
January Brent crude on London’s ICE Futures exchange rose $2.39, or 3.4%, to finish at $72.54 a barrel. That was Brent’s highest percentage gain since October 2012, and the gains put a stop to a five-session decline. On Friday, Brent settled at its lowest level since May 2010.
New York-traded oil changed hands for as low as $63.72 a barrel earlier Monday as the market attempted to find a floor after the sharp sell off. It remains to be seen whether Monday’s gains would “stick,” said Tim Evans, an energy analyst with Citi Futures. There’s no “fundamental case for a sustained recovery, at least until OPEC thinks better of its strategy,” he said. “From a fundamental perspective, we think the downside remains open in the absence of a significant geopolitical supply disruption,” he added.
Friday’s and early Monday’s drops might have been an exaggerated price response, analysts at Commerzbank said in a report. “Nonetheless, there is no end in sight to the price slump, the prospect of a massive oversupply in the first half of 2015 – to the tune of roughly 1.5 million barrels per day – weighing heavily on prices. Now that OPEC has refused to take any steps itself to reduce this oversupply, non-OPEC producers will have to do their bit,” the analysts added.
The OPEC’s move was seen by some as a way to maintain the bloc’s market share. Over the weekend, United Arab Emirates’ Oil Minister Suhail Mohamed Faraj Al-Mazrouei said OPEC had no target price it would seek to defend. “The market will dictate the right sustainable and stable price, and we are not targeting or setting a specific price,” Al-Mazrouei wrote on Twitter, according to a Wall Street Journal report.