AFX News Limited
Oil rebounds slightly following yesterday's
decline, as specs influence market
07.27.07, 9:08 AM ET
LONDON (Thomson Financial) -
Oil rebounded slightly, correcting
from yesterday's decline, as investors
took advantage of the drop in prices to
buy into crude.
Oil went on a rollercoaster ride yesterday,
after prices spiked higher in early trade on
declining US crude inventories, before being
dragged sharply lower by falling equity stocks.
Brent crude dropped almost two dollars by the
close in London yesterday from its intraday
high of 77.16 usd.
Analysts pointed to the unusually high number of speculative buyers at play in the market to explain the fluctuating
prices over the last week.
'The funds have definitely been behind the sharp move up in the last week,' said Petromatrix analyst Olivier Jakob. 'I
think the trend for now is to buy on the dips so we could see it come back up today.'
At 12.43 pm, London's benchmark Brent crude contracts for September delivery were up 16 cents at 75.34 usd per
barrel.
Meanwhile, New York crude contracts for September delivery were up 16 cents at 75.11 usd per barrel.
Market players are now awaiting for second quarter US GDP data -- that is released today at 1.30 pm London time -- to
gauge its effect on equity markets, as a faltering American economy, already rocked by the sub-prime mortgage fallout,
could impact the medium-term demand for oil.
Moves in US equities are also currently unusually important due to the high number of non-physical buyers in the
market, who have a broader portfolio of interests.
Analysts argue that speculators have taken on a large number of long positions in oil, which has boosted the market in
recent weeks.
However, following oil's failure to push through last August's all time highs, some investors are becoming nervous and
bailing out of positions at the first sign the market has hit its seasonal peak.
Oil prices have risen around 18 pct in the last eight weeks over concerns on supply due to low US gasoline inventories
and geopolitcal tension ahead of the American peak demand summer driving season.
Oil's gains have been supported by a weakening US dollar, which makes prices lower in real terms and for holders of
other currencies, as well as money flowing into the market from non-physical buyers.
However, Brent crude has thus far failed to push beyond last year's all time high of 78.65 usd, peaking at 78.40 usd two
weeks ago, making market player's nervous about the rally's sustainability.
'Given that the rally has been on the back of the funds then at some point you could see a sharp correction should
investors liquidate their positions,' said Jakob at Petromatrix.
'For three days now we've also seen the dollar strengthening, so it is important to watch it closely,' he added.
With Brent and New York crude contracts currently in backwardation, where prices in the future months are lower
despite storage costs -- a sign of high demand -- analysts are predicting that most speculative buyers will remain in the
market until this situation is reversed.
However, some analysts are viewing the influx of fund money into the market as an ongoing trend, based on long-term
predictions for rising global crude demand due to the growth of India and China, tempting investors to remain in the
market.
'I think that hedge funds and investment trusts are looking at oil long-term so there will be a steady stream of money into
the market,' said Bank of Ireland (nyse: IRE - news - people ) analyst Paul Harris (nyse: HRS - news - people ). 'People
are getting comfortable with the idea of oil pushing above 100 usd in the coming years.'
Additional Articles For further study:
"Dollar Gains Against Euro; Yen as US Stock Futures Rebound" Bloomberg 7/25/07
"Asian Stocks Rebound; Led by JFE Holdings" Bloomberg 7/30/07
"Dollar Decline Looks Set to Resume Next Week" FX Outlook 7/27/07
"Inflation in India; How to Tackel it" Rediff 3/21/07
"The Coming Collapse of the US Dollar" Rediff 6/11/07
“Signs of the Times” by Dr. Irwin Kellner
“Fed Chickens Out” by MoneyNews.com editors
“Gold, What's Next” by Mary Anne and Pamela Aden 7/25/07
“Industrial Metals Rise - Gold Also Gains" 7/20/07
“GOLD: Big Picture Focus” by Mary Anne and Pamela Aden
"Oil Rebounds Following Decline of the Dollar" 727/07
"Set to Resume Next Week" by FX Outlook 7/27/07
"The Faultlines in the Economy" by Alan Maas
"U.S. Current-Account Deficit Deserves Some Noise" by John M. Berry
"Why the sudden dollar plunge?" By John Stepek, MoneyWeek
If you have any questions regarding these or any other articles you've read, feel free to contact me by calling me
directly David Hellier at (877) 314-COIN (2646) or email me anytime at dave@superiordiscountcoins.com.
Oil rebounds slightly following yesterday's
decline, as specs influence market
07.27.07, 9:08 AM ET
LONDON (Thomson Financial) -
Oil rebounded slightly, correcting
from yesterday's decline, as investors
took advantage of the drop in prices to
buy into crude.
Oil went on a rollercoaster ride yesterday,
after prices spiked higher in early trade on
declining US crude inventories, before being
dragged sharply lower by falling equity stocks.
Brent crude dropped almost two dollars by the
close in London yesterday from its intraday
high of 77.16 usd.
Analysts pointed to the unusually high number of speculative buyers at play in the market to explain the fluctuating
prices over the last week.
'The funds have definitely been behind the sharp move up in the last week,' said Petromatrix analyst Olivier Jakob. 'I
think the trend for now is to buy on the dips so we could see it come back up today.'
At 12.43 pm, London's benchmark Brent crude contracts for September delivery were up 16 cents at 75.34 usd per
barrel.
Meanwhile, New York crude contracts for September delivery were up 16 cents at 75.11 usd per barrel.
Market players are now awaiting for second quarter US GDP data -- that is released today at 1.30 pm London time -- to
gauge its effect on equity markets, as a faltering American economy, already rocked by the sub-prime mortgage fallout,
could impact the medium-term demand for oil.
Moves in US equities are also currently unusually important due to the high number of non-physical buyers in the
market, who have a broader portfolio of interests.
Analysts argue that speculators have taken on a large number of long positions in oil, which has boosted the market in
recent weeks.
However, following oil's failure to push through last August's all time highs, some investors are becoming nervous and
bailing out of positions at the first sign the market has hit its seasonal peak.
Oil prices have risen around 18 pct in the last eight weeks over concerns on supply due to low US gasoline inventories
and geopolitcal tension ahead of the American peak demand summer driving season.
Oil's gains have been supported by a weakening US dollar, which makes prices lower in real terms and for holders of
other currencies, as well as money flowing into the market from non-physical buyers.
However, Brent crude has thus far failed to push beyond last year's all time high of 78.65 usd, peaking at 78.40 usd two
weeks ago, making market player's nervous about the rally's sustainability.
'Given that the rally has been on the back of the funds then at some point you could see a sharp correction should
investors liquidate their positions,' said Jakob at Petromatrix.
'For three days now we've also seen the dollar strengthening, so it is important to watch it closely,' he added.
With Brent and New York crude contracts currently in backwardation, where prices in the future months are lower
despite storage costs -- a sign of high demand -- analysts are predicting that most speculative buyers will remain in the
market until this situation is reversed.
However, some analysts are viewing the influx of fund money into the market as an ongoing trend, based on long-term
predictions for rising global crude demand due to the growth of India and China, tempting investors to remain in the
market.
'I think that hedge funds and investment trusts are looking at oil long-term so there will be a steady stream of money into
the market,' said Bank of Ireland (nyse: IRE - news - people ) analyst Paul Harris (nyse: HRS - news - people ). 'People
are getting comfortable with the idea of oil pushing above 100 usd in the coming years.'
Additional Articles For further study:
"Dollar Gains Against Euro; Yen as US Stock Futures Rebound" Bloomberg 7/25/07
"Asian Stocks Rebound; Led by JFE Holdings" Bloomberg 7/30/07
"Dollar Decline Looks Set to Resume Next Week" FX Outlook 7/27/07
"Inflation in India; How to Tackel it" Rediff 3/21/07
"The Coming Collapse of the US Dollar" Rediff 6/11/07
“Signs of the Times” by Dr. Irwin Kellner
“Fed Chickens Out” by MoneyNews.com editors
“Gold, What's Next” by Mary Anne and Pamela Aden 7/25/07
“Industrial Metals Rise - Gold Also Gains" 7/20/07
“GOLD: Big Picture Focus” by Mary Anne and Pamela Aden
"Oil Rebounds Following Decline of the Dollar" 727/07
"Set to Resume Next Week" by FX Outlook 7/27/07
"The Faultlines in the Economy" by Alan Maas
"U.S. Current-Account Deficit Deserves Some Noise" by John M. Berry
"Why the sudden dollar plunge?" By John Stepek, MoneyWeek
If you have any questions regarding these or any other articles you've read, feel free to contact me by calling me
directly David Hellier at (877) 314-COIN (2646) or email me anytime at dave@superiordiscountcoins.com.
