MW: Oil futures volatile after Saudi pledge to stabilize market
Oil futures edged higher on Monday in volatile trade as the market reacted to Saudi Arabia’s pledge to work with global oil producers to help stabilize prices.
January West Texas Intermediate crude CLF6, +1.19% added 17 cents, or 0.4%, to $42.07 a barrel on the New York Mercantile Exchange. Brent crude LCOF6, +1.93% was up 50 cents, or 1.1%, to $45.16 a barrel on London’s ICE Futures exchange.
Oil futures had spiked higher, with WTI futures trading as high as $42.75 a barrel, after the Saudi Press Agency reiterated that the country was ready to work with oil producing and exporting nations toward stable prices. The rebound soon lost steam, however, as analysts noted the remarks were in line with previous Saudi statements.
“We are constantly bouncing from the area of $40 and if the Saudis do not deliver what they have said ... we could see the oil price dropping below the $35 level,” said Naeem Aslam, chief market analyst at AvaTrade. “To trade on these headlines is always a very dangerous strategy as volatility picks up substantially.”
So far, there’s little indication Saudi Arabia is prepared to begin cutting production, said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Flynn said much of the market action appeared technical in nature, with the January Nymex WTI contract moving lower to largely fill the gap left on the continuous futures chart after the expiration of the December contract at $40.35 a barrel last week.
After coming within almost a nickel of closing the gap, the Saudi news offered an excuse to cover short positions, he said.
Analysts said oil might have trouble shaking off weakness amid a stronger U.S. dollar and persistent worries about the global surplus of crude. The ICE U.S. dollar index DXY, +0.17% climbed Monday on growing expectations that the U.S. Federal Reserve will raise the interest rates in December.
Dollar-priced metals, from copper HGZ5, -1.56% to gold GCZ5, -0.69% traded lower Monday.
But for now, energy futures prices followed oil higher, with Nymex December gasoline RBZ5, +2.80% adding 2.5 cents, or 2%,to $1.315 a gallon and December heating oil HOZ5, +1.93% tacking on 2.4 cents, or 1.8%, to $1.395 a gallon.
December natural gas NGZ15, +0.79% rose a penny to $2.154 per million British thermal units.
