Business | Oil & Gas
US crude prices rally after finding support at $98
New York traders had every expectation that Nymex WTI would breach $98 per barrel on the low side as a result of the gloomy US growth forecast predicted for the next two to three quarters by analysts.
- By Dalton H. Garism, Special to Gulf News
- Published: 00:55 March 30, 2008
Abu Dhabi: New York traders had every expectation that Nymex WTI would breach $98 per barrel on the low side as a result of the gloomy US growth forecast predicted for the next two to three quarters by analysts. It was gloomy enough that it pried traders' eyes off the eroding value of the dollar that had been pushing up crude prices in the previous week.
But when prices failed to breach support at $98, it was clear that prices would head upwards again. Those who had sold short, betting prices would continue to fall, had to cover their positions, thus causing a technical rally of around $3. Adding to bullish sentiment was news of a Basra pipeline disruption.
Bias
The upward price bias on any news likely to be interpreted by markets as bullish explains the additional $4 rise during the week. The Nymex WTI benchmark crude finished the week at $105.62.
The short-covering technical rally added momentum at the lowest point of the price decline, allowing prices to take off more than expected on the US EIA's report of slightly lower weekly crude inventories, and easily overcame the negativity spun by analysts' almost universal judgement that the US economy is already in recession or no-growth mode for now.
DME Oman remains range-bound within a $3 price band, awaiting significant news to initiate a trend up or down. Such news might be Worldscale tanker index leasing rate changes for loads to the Far East.
Last week, natural gas rose on colder weather in the US northeast and in Europe, and amid nagging concerns regarding the continuing undercurrent of hostility between Russia, Europe's big supplier, and Ukraine, the infrastructural hub of Russia's western gas shipments.
Nymex gas closed the week at $9.80 per million btu after beginning the week at about $9.10 on Nymex. But an almost eight per cent price change in just one week is not unusual in natural gas markets.
The writer is associate professor of Economics and Petroleum Market Research at The Petroleum Institute, Abu Dhabi.
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