Oil prices surged Friday, moving in step with stock futures and European stock markets, which also climbed after a volatile week of trading.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in NovemberCLX4, +0.36% jumped $1.05, or 1.3%, to $83.75 a barrel in the Globex electronic session. December Brent crude on London’s ICE Futures exchange LCOZ4, +0.16% jumped 91 cents, or 1%, to $86.75 a barrel.
Oil prices climbed alongside U.S. stock futures, which surged ahead of the start of trading on Wall Street. As well, European stock markets SXXP, +1.85% pushed sharply higher. The rebound, which was also seen in the U.S. Thursday, was credited to a technical correction triggered by investors returning securities that they had borrowed to make so-called short investments in oil, noted analysts at Commerzbank.
Shorting a security is when a trader or investor bets that the price of that security is going to drop. They borrow shares, sell them, and then hope to buy them back at a lower price and pocket the difference.
But some say this is going to be a short-lived respite for crude prices, which are down more than 2% this week, based on a continuous contract basis. “Oil prices are likely to resume their downswing after this brief interlude because market participants will doubtless take advantage of the higher price level to jettison their long positions,” said Commerzbank analysts.
Investors are waiting for the meeting of the Organization of the Petroleum Exporting Countries in Vienna next month for guidance on oil exports from member countries, mainly Saudi Arabia. Initial reports indicate that the countries are unlikely to curb oil export volumes.
Oil producers including Saudi Arabia, Kuwait and the United Arab Emirates plan to oppose any cut to OPEC’s oil-production ceiling at next month’s meeting, according to people familiar with the situation.
OPEC may likely engage in the war of marginal cost, where their low production costs would allow them to absorb current oil price lows and maintain market share versus other global oil producers, economist Barnabas Gan at Singapore’s OCBC Bank said.
He said the market is digesting the new comfort level of $80 a barrel outlined by Saudi Arabia and which should be the mainstay for this year.
Meanwhile, the U.S. oil benchmark wasn’t affected after the U.S. Energy Information Administration posted a larger-than-expected build-up in weekly oil stockpiles on Thursday. “An 8.9 million-barrel increase in crude inventories was almost offset by a 7.9 million barrel draw in refined product stocks,” BNP Paribas said.
Nymex reformulated gasoline blendstock for November RBX4, -0.14% — the benchmark gasoline contract — rose 143 points to $2.2252 a gallon.
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