Market Close: Dec 8 & Dec 9
Dec 10th, 2014 by loren
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Crude-oil futures rose Tuesday, a day after being knocked down to a five-year low amid fears the market won’t find a bottom soon. On the New York Mercantile Exchange, light, sweet crude futures for delivery in January rose 77 cents, or 1.2%, to settle at $63.82 a barrel. That snapped a three-session losing streak. January Brent crude on London’s ICE Futures exchange rose 65 cents, or 1%, to end at $66.84 a barrel. That put an end to a five-session losing streak. Futures had been weaving in and out of positive territory, before moving significantly higher in a day of choppy trading action framed by concerns about China’s economy and worries about Greece. “Weakness in the dollar is encouraging a bounce today, as is some brave bargain-hunters trying to catch a falling knife,” said Matt Smith, an analyst with Schneider Electric.
A weaker dollar is usually a boost to dollar-denominated commodities as it makes them cheaper to holders of other currencies. Prices slid to a five-year low on Monday, amid fears a global oil glut will persist into next year. Iraq cut the price of its January flagship Bashrah Light oil for Asian and American buyers on Monday, though it lifted the price for European customers. That’s in line with moves by Saudi Arabia earlier this month. Analysts at Commerzbank said in a note that the Organization of the Petroleum Exporting Countries is clearly not going to react to low oil prices, and moves such as Iraq’s are just adding fuel to the fire. The sell off in oil markets accelerated sharply in late November when the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, chose not to cut its production levels. Since then, the cartel hasn’t provided any further indications of balancing supply. “This has contributed to intensifying the hand-wringing in the market over the potential for massive oversupply in 2015,” Greg Priddy, head of energy and resources at Eurasia Group said in a report.
He expects the core members of OPEC to eventually take action but not anytime soon, and “letting the market sweat it out for a few more weeks, perhaps into January” is quite possible.
Demand forecast cut: Earlier Tuesday, the U.S. Energy Information Administration said it cut its 2015 global demand forecast for crude oil by 200,000 barrels a day to an average of 92.3 million barrels a day, based on weaker global economic growth prospects for next year. In its monthly short-term outlook, the EIA also said retail gasoline will average $2.60 a gallon in 2015, 35 cents lower than the EIA’s prediction in the previous outlook. Gasoline is expected to retail for an average of $3.37 a gallon this year, from $3.51 a gallon in 2013. The EIA forecast Brent crude prices to average $68 a barrel next year, $15 a barrel lower than what it had projected in last month’s outlook. New York-traded oil was seen averaging $63 a barrel in 2015, also $15 a barrel lower than in the previous outlook.