Time to Call a Bottom? Oil Futures Surge
Crude oil surged the most in more than 2½ years after falling to the lowest since 2009.
Oil futures rose 5.6% in New York and 4.5% in London. Options expiration bolstered activity, while technical indicators signaled that crude was due for a rebound. Futures have dropped the past six months, the longest stretch in six years. During this period, West Texas Intermediate posted five weekly gains before resuming its slide.
“We’ve fallen so far so fast that some folks think it’s time to call a bottom,” Michael Wittner, head of oil research at Societe Generale in New York, said by phone. “It’s way premature to say the bear market is over. We’ve been stair-stepping down all along, and at several stages the market has had to take a breather.”
Oil slumped almost 50% last year, the most since 2008, as the Organization of Petroleum Exporting Countries resisted calls to cut output even as the United States pumped at the fastest rate in more than three decades. WTI briefly traded higher than Brent on Jan. 14 for the first time since July 2013, a signal that Saudi Arabia’s strategy of curbing shale output growth is working, according to Societe Generale.
WTI for February delivery rose $2.59 to settle at $48.48 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 76% above the 100-day average at 3:56 p.m. EST. The contract slipped to $45.89 on Jan. 13, the lowest close since April 2009.
Brent for February settlement increased $2.10, or 4.5%, to end the session at $48.69 a barrel on the London-based ICE Futures Europe exchange. Volume for all futures traded was 69% higher than the 100-day average. The February contract, which expires Jan. 15, closed at a 21-cent premium to WTI, the lowest since July 2013.
The market was “overdue” for a correction, said Jeff Grossman, president of New York-based BRG Brokerage. “It’s been down, down, down. It’s lifting its head.”
“A lot of what we’re seeing here is technical,” John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said by phone. “After WTI was unable to break below $44 [Jan. 14], that’s become an area of some support.”
“This may not be the end of the move lower,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “We’ve had several periods, some lasting a couple weeks, when prices appeared to recover only to see them break lower again.”
The market discounted an Energy Information Administration report that showed U.S. crude and fuel stockpiles increased last week.
Gasoline futures jumped 6.5% to $1.3507 a gallon. Ultra-low-sulfur diesel gained 1.4% to $1.6552.
Regular gasoline at U.S. pumps fell to the lowest level since May 2009. The average retail price slipped 1.6 cents to $2.101 a gallon Jan.13, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group. Pump prices were around $2.05 a gallon when oil was last below $50 a barrel.
