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Monday, February 02, 2015
Oil surges 8% as US rig count plunges, shorts cover
[Editor: It was expected and I had hinted about that last week, when most of the "Analysts" across the globe including the savvy Hedge Fund Managers were looking for further weakness. It is natural to understand that ultimately there would be a balance of demand and supply at a particular price tag. I had commented at that time, that the crude oil has perhaps bottomed out at around USD 45 per barrel. Then came positive comments from the OPEC head.
Also, it is pertinent to mention here that the traders had heavily shorted the crude oil market, which also aided to the rise. I had mentioned that the time that the crude oil will now slowly move towards USD 60 per barrel. With the rise in oil, there could be a revival in the global commodity prices, especially Steel, Aluminium and Copper. I am already bullish on the Steel and Ferro Alloys sector and have given a buy on Rohit Ferro Tech Ltd (Rs.8.45) for at least 50% appreciation in the next couple of months]
Jan 31, 2015: Oil prices rocketed more than 8 percent higher on Friday, their biggest one-day gain in two and a half years, after data showed US drillers were slamming the brakes on the shale drilling boom.
In a rally that may spur speculation that a seven-month price collapse has ended, global benchmark Brent crude shot up to more than USD 53, its highest in more than three weeks, after Baker Hughes data showed the number of rigs drilling for oil in the United States fell by 94 - or 7 percent - this week.
Two weeks of relatively stable oil prices have helped shift sentiment after months of decline, setting the stage for the violent rebound on Friday afternoon. Short traders raced to cover their positions on fears that the rout was nearing its end.
Some "short covering was expected and the rig count number sparked the rally late," said Phil Flynn, analyst at Price Futures Group in Chicago.
The rig count drop was the most since 1987. With drillers having idled about 24 percent of their oil drilling rigs since the summer, some traders may be betting that an anticipated slowdown in US oil production is nearer than expected. US oil futures rose by USD 3.71, or 8.3 percent, to settle at USD 48.24 a barrel, soaring by nearly USD 3 in the final frenzied hour or so of trade.