US oil rises 7.6 pct, hits $32
17 Mins Ago
Reuters
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Oil prices jumped more than 7 percent on Wednesday, snapping a two-day rout, after investors took advantage of a weaker U.S. dollar and shrugged off data showing a unexpected large surge in U.S. crude inventories to record highs.
Comments by Russia's Foreign Minister reiterating the major producer's willingness to meet if there was consensus among the OPEC and non-OPEC members, also reignited hopes of a deal to trim output and helped to boost prices as much as 7 percent.
The dollar index tumbled to an over seven-week low amid growing skepticism that the Federal Reserve would be able to hike U.S. interest rates again this year and after data showed the U.S. services industry grew more slowly than expected last month.
Brent futures rose $2.08, or 5.35 percent, to $34.78 a barrel by 2:13 p.m. EST (1855 GMT), after rising as high as $34.93. U.S. crude futures rose $2.20 or 7.4 percent, to $32.10, a new high.
Workers prepare pipes to service an oil well operated by a subsidiary of the KazMunayGas Exploration Production JSC in Kazakhstan, January 21, 2016.
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"We're getting the rally in crude oil from the pounding that the dollar is taking," said Robert Yawger, senior vice president of energy futures at Mizuho Securities USA.
"There is a little bit of spec activity involved in that too. The market has a tendency as of late here to draw in spec position when we trade below $30," he added.
In the last year, speculators had racked up the largest short, or bearish, position in crude oil in history and part of the current volatility in the price has come as a result of some of those positions being closed.
The markets shrugged off government data showing U.S. crude and gasoline inventories rose to record levels last week. Crude soared 7.8 million barrels higher, topping analysts' expectations for a rise of 4.8 million barrels, as imports jumped and refiners trimmed throughput.
"People say 'I think the market has bottomed, there's no place else to go but up from here' — I don't agree with that premise. I think we will make new lows before we start moving up higher — there's just so much oil out there you don't know what to do with it," Sal Umek of the Energy Management Institute in New York said.
"The bears are controlling the market, the bulls are only going to go in and try to get a little bit here and there"
An employee of Stewarts Inc., an oilfield service company, work on a chemical drum at a drilling site in the Permian Basin oil field on January 20, 2016 in the oil town of Andrews, Texas.
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The 70 percent drop in the crude price over the last 18 months has forced even the largest oil companies such as BP , ExxonMobil and Shell to cut jobs and slash spending. It has also hit the budgets of oil-dependent nations such as Nigeria, Venezuela, Russia and even some of the richer Gulf nations such as Bahrain.
Demand for oil, particularly in Asia, proved robust last year, but not enough to absorb near-record supply and ballooning inventories of unwanted crude.
The low of $32.30 in Brent struck on Wednesday also marked the halfway point between the price lows in January and the highs seen earlier this week, and a point at which speculators swooped in to buy.
A rebalancing between oil demand and supply will not come until mid-2017, Morgan Stanley said in a note.
"Despite the myriad announcements of capex cuts, production has yet to respond enough to rebalance the market," Morgan Stanley said.
Goldman Sachs in a note on Monday said volatility in the oil price, which is at its highest since the collapse of failed U.S. investment bank Lehman Brothers in 2008, could reach 100 percent as storage capacity comes under pressure.