crude oil futures news

crude oil futures news

February 2nd, 2015

Crude oil markets rallied Monday morning, shrugging off news of U.S. refinery strikes and sluggish Chinese manufacturing, as traders continued Friday’s run to close out bearish bets, traders and analysts said.
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Light, sweet crude for March delivery was recently up 32 cents, or 0.7%, at $48.56 a barrel on the New York Mercantile Exchange. Brent crude for March delivery recently traded up 44 cents, or 0.8%, to $53.43 a barrel on the ICE Futures Europe exchange.

The move adds to the 8% gains from Friday and took U.S. oil briefly over $50 a barrel for the first time since Jan. 15. After months of large, steady losses, analysts are starting to debate whether this rally is a sign that crude prices have stabilized.

“The easy part of trading the (bearish) side of this complex is over,” said Jim Ritterbusch , president of energy-advisory firm Ritterbusch & Associates, in a note to clients.

On Friday, oil-field-services company Baker Hughes reported domestic oil-drilling rigs fell by 7% for the week, bringing the count to 1,223, the lowest in three years. Traders were also worried about new threats to oil production from the conflict in Iraq, analysts said.

The data and earnings reports from the past week are showing that drilling cutbacks are coming in larger and quicker than expected, the energy investment bank Tudor, Pickering, Holt & Co. said Monday morning. It seems “increasingly plausible” that U.S. oil rigs could be down more than 40% by the second half of this year, with production shrinking from 2015 to 2016 by as much as much 600,000 barrels a day, the bank said.

Gordon Kwan, head of oil research at Nomura, told clients the cutbacks should support a recovery in oil prices by the end of the year. A 15% to 20% drop in U.S. production would eliminate global oversupply of as much as 2 million barrels a day, Mr. Kwan said.

“Generally speaking it’s kind of bullish for the commodity that any small bit of news on the price level pushes it up,” said Brandon Blossman, a Tudor analyst. “It shows some nervousness among traders that things have bottomed.”

Analysts also said that refinery strikes—bearish for oil demand—could at least temporarily be having a bullish impact. Gasoline prices are having their biggest day of gains since March and diesel is posting big gains, too, possibly dragging oil up with them.

Workers represented by the United Steelworkers union at U.S. refineries that produce nearly 10% of the nation’s gasoline, diesel and other fuels went on strike Sunday after contract negotiations broke down over salaries and safety concerns. The union said the strike affects 3,800 workers.

Oil refiners like Royal Dutch Shell PLC., Tesoro Corp. , Marathon Petroleum Corp. and LyondellBasell Industries said they would keep plants operating under contingency plans.

Crude prices did initially fall on the news. It fueled concerns that any reduction in refining capacity could cut consumption and allow supplies to build even more after inventories touched record highs in recent weeks.

Data showing that China’s manufacturing sector contracted in January also added to early losses. It indicated a slowdown in the world’s second-largest oil consumer.

The HSBC China manufacturing purchasing managers index inched up to 49.7 for January from 49.6 in December, HSBC said Monday.

The data came a day after China’s official PMI dipped to 49.8 for January, the first reading below 50 since 2012. A reading below 50 indicates a contraction.

“While today’s rally is a technical follow-through from Friday, fundamentals haven’t really changed and macro data is still not supportive for oil,” said Harry Tchilinguirian, head of commodity strategy at BNP Paribas .

March reformulated gasoline blendstock, or RBOB, recently rose 2.84 cents, or 1.9%, to $1.5072 a gallon.

March diesel recently rose 2.12 cents, or 1.3%, to $1.7220 a gallon.

—Eric Yep, Richard Silk and Alison Sider Wall Street Journal.