Wednesday February 04, 2009

NYMEX crude oil rises above $41 and off $32.70 lows as OPEC may cut production further

bloomberg.com :

NYMEX crude oil prices rose for a second day in New York after OPEC's president said the group may reduce output further to trim stockpiles. Angolan Oil Minister Jose Maria Botelho de Vasconcelos, the current OPEC president, said "new measures" may be taken at OPEC's March 15 meeting in Vienna if the current round of cuts don't raise prices. OPEC reduced 1.05 million barrels a day of production last month, according to a survey of producers, oil companies and analysts.

Crude oil prices for Mar 2009 delivery rose to as much as $41.13 a barrel on the New York Mercantile Exchange. Prices are down 8% this year and 54% from a year ago. OPEC agreed on 17 Dec 2008 to cut production as oil prices headed for their first annual decline since 2001. For Angola, an oil price of $75 a barrel "would already be very good," Botelho de Vasconcelos said yesterday [3 Feb 2009]. There is a "50-50 probability" that OPEC will trim quotas at its March 15 meeting, Algerian Oil Minister Chakib Khelil said. The price of oil for delivery Jan 2010 is 32% more than for the current month, increasing the opportunity for traders to profit from storing crude for later use. This is known as contango, in which a future month's price is higher than the one before it.

- This is early stage stuff as yet (no *ahem* crude comments please if this turns out to be wrong) but it does look like crude oil prices may have done a little bit of a double bottom off the $32.40 and $32.70 levels. From the charts, the price looks like it is comfortably trading in the $40-$50 range. Time for a bit of base-building perhaps?

Yes, there are a thousand and one factors pushing and pulling on the oil prices but here's something that you might want to take note of - the TNX (10-year Treasury) yield has pulled off its own rather dramatic double bottom (check out the 1-year chart and then the max chart). The community is still skeptical but there is some talk that this may be an indicator of a return of inflation. Accordingly, gold prices have jumped to the $900 level decisively breaking through (yet again) the famed $850 level of Jan 1980 and silver prices have also done quite well recently. So we'll see.

See also :

1. NYMEX crude oil falls more than $100 from Jul 2008 record on US recession, OPEC production cut delay
2. NYMEX crude oil recovers from $32.40 low after 2.2 mbpd OPEC production cut announced
3. NYMEX crude oil prices rebound above $50 on OPEC cuts, Russia gas dispute, Middle East conflict
4. NYMEX crude oil prices fall below $40 as demand drops faster than supply

(2009-02-04 14:20:31 SGT) [Energy] Permalink

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