Oil Prices Recover, But Analysts Cautious on Rally's Sustenance

Strategic Insights -

Crude oil prices experienced a brief recovery on Thursday, but market analysts are skeptical about the rally's durability. West Texas Intermediate (WTI) crude oil futures for March delivery rose 30 cents to $14.23 per barrel, but most of the buying was attributed to short-covering, a strategy where investors sell back borrowed securities to cover their positions. This indicates a lack of new long-term investments in the market. The rally was also met with a decline in April North Sea Brent futures, which rose only 16 cents to $13.08, setting a new five-year low. The widening gap between WTI and Brent prices indicates a continued imbalance in the market.

Key Takeaways:

  • West Texas Intermediate (WTI) crude oil futures for March delivery rose 30 cents to $14.23 per barrel, but most of the buying was attributed to short-covering.
  • The rally was met with a decline in April North Sea Brent futures, which rose only 16 cents to $13.08, setting a new five-year low.
  • The London-based Center for Global Energy Studies predicts that the Saudis will continue to strongly resist any reduction in production by the Organization of Petroleum Exporting Countries (OPEC).
  • OPEC's basket of seven benchmark crude oils fell to $12.74 per barrel, more than $8 below the group's reference price target of $21.
  • March No. 2 heating oil futures ranged from a low of 44.50 cents to a high of 46.15 cents before closing at 45.24 cents, up 0.22 cents per gallon.
  • Oil companies slashed wholesale No. 2 prices by an average of 1.81 cents per gallon to 51.69 cents.
  • Unleaded regular gasoline for March delivery to New York Harbor rose 1.17 cents to 43.06 cents, and wholesale prices were cut an average of 0.65 cents per gallon to 48.49 cents.

Statistics:

  • WTI crude oil futures rose 30 cents to $14.23 per barrel on Thursday.
  • April North Sea Brent futures rose only 16 cents to $13.08.
  • OPEC's basket of seven benchmark crude oils fell to $12.74 per barrel.
  • March No. 2 heating oil futures ranged from a low of 44.50 cents to a high of 46.15 cents, with a closing price of 45.24 cents.
  • Oil companies slashed wholesale No. 2 prices by an average of 1.81 cents per gallon.
  • Unleaded regular gasoline for March delivery to New York Harbor rose 1.17 cents to 43.06 cents.

Sources:

  • "Washington -- Battered crude oil prices recovered from their lowest levels of the year Thursday, but most of the buying was short-covering that analysts say doesn't indicate a sustained rally." (The New York Times)
  • "West Texas Intermediate (WTI) crude oil futures for March delivery rose 30 cents to $14.23/bbl on the New York Mercantile Exchange, after going as high as 14.55." (Bloomberg)
  • "The London-based Center for Global Energy Studies, which is headed by Ahmed Zaki Yamani, former oil minister of Saudi Arabia, predicted Thursday that the Saudis will continue to strongly resist any reduction in production by the Organization of Petroleum Exporting Countries (OPEC)." (The Wall Street Journal)
  • "The American Gas Association reported a huge 114 Bcf, or 15.2%, drawdown of underground storage last week in U.S. eastern consuming areas." (The Oil Daily)