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Oil Prices Stabilize Amid Colder Weather, Dollar Strengthening

Strategic Insights

— 1 min read

Oil futures stabilized in Europe Monday after heavy losses last week, as traders hoped that colder weather and a pause in the dollar rally could help crude recover. Despite sovereign debt woes in Europe and talk of tighter credit in China, analysts remained upbeat about the prospects of a recovery in oil prices. The front-month March Brent contract on London's ICE futures exchange was 11 cents higher at $69.70 a barrel, while the front-month March contract on the New York Mercantile Exchange was trading 6 cents higher at $71.25 a barrel.

Key Takeaways:

  • Oil prices stabilized in Europe Monday after heavy losses last week, with the front-month March Brent contract on London's ICE futures exchange trading 11 cents higher at $69.70 a barrel.
  • Analysts remain upbeat about the prospects of a recovery in oil prices, citing colder weather in the northern hemisphere, bargain hunting by traders, and a hiatus in the dollar rally.
  • The contango price structure, which has narrowed on the back of recent price falls, could signal a bounce back in oil prices, according to Dennis Gartman, editor and publisher of the Gartman Letter.
  • However, other analysts remain less sanguine, arguing that fundamentally oil demand hasn't made a meaningful recovery, citing a surprise 2.3-million-barrel build in crude stocks last week.
  • Edward Meir, senior commodity analyst at MF Global in New York, noted that a combination of short-covering, colder weather in the U.S., and a pause in the dollar rally could give commodity complexes a little room to push higher.

Statistics:

  • Front-month March Brent contract on London's ICE futures exchange: $69.70 a barrel (up 11 cents from previous day)
  • Front-month March contract on the New York Mercantile Exchange: $71.25 a barrel (up 6 cents from previous day)
  • ICE's gasoil contract for February delivery: $567.00 a metric ton (down $8.25 from previous day)
  • Nymex gasoline for March delivery: 189 cents a gallon (up 36 points from previous day)
  • Surprise 2.3-million-barrel build in crude stocks last week

Sources:

  • Reza Amanat, Dow Jones Newswires; reza.amanat@dowjones.com (Dow Jones Newswires; copyright 2010 Dow Jones & Company, Inc.)
  • Edward Meir, senior commodity analyst at MF Global in New York (no source provided)
  • Dennis Gartman, editor and publisher of the Gartman Letter (no source provided)
  • Commodity analysts at Commerzbank led by Eugen Weinberg in Frankfurt (no source provided)

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