Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Oil in 2nd Weekly Gain as Money Floods Commodities 

Published 12/02/2021, 17:36
Updated 12/02/2021, 17:37
© Reuters.

© Reuters.

Investing.com - Crude prices were headed for a second straight week of gains on Friday as money continued to slosh into commodity markets, lifting prices of almost everything, from oil to copper and US Soybeans Futures  — even lhog futures.

Since February began, price screens for Nymex, Comex, and CBOT — the exchanges for energy, metals, and agriculture — have been flashing green in unison almost every day, like pinball machines on a winning streak. 

While each market is driven by its own fundamentals, the one common thing buoying them all, like the proverbial tide that lifts all boats, is the flow of cheap, easy funds looking for sexy returns as U.S. rate hikes look doomed for now and the Federal Reserve keeps printing money to stimulate recovery from the Covid-19. President Joe Biden also has a $1.9 trillion coronavirus relief plan seeking Congressional approval.

“Economic scarring will warrant easy money for a lot longer,” said Ed Moya, a senior market strategist at OANDA in New York. 

“Crude prices continue to rally as optimism overflows. Given the strength heading into a long weekend, it seems energy traders are hesitant on scaling back,” he said, referring to Monday’s President’s Day holiday in the United States. 

New York-traded WTI was up 5% for the week, hovering at $59.75 per barrel by 12:30 PM ET (17:30 GMT). It earlier hit a session peak of $59.81, its highest since January 2020. Last week, WTI rose nearly 9%.

London-traded Brent, the global benchmark for crude, gained 5.9% on the week, trading at $62.81, after setting a 13-month high of $62.83 earlier on Friday. Brent gained a similar 6% last week.

Oil’s marathon rally over the past two months has been sparked and sustained by a combination of factors. It began with the November breakthrough in vaccines for the Covid-19, followed up by OPEC leader Saudi Arabia’s announcement of deeper production cuts in January; commodity-index linked buying of oil, sizable weekly drops in U.S. crude stockpiles and hopes for economic stimulus from the Biden administration. 

Many analysts, as well as industry executives from Vitol and Gunvor, had expressed caution over the rally.

Technical chartists repeatedly referred to the breach of the Relative Strength Index metric for WTI, which was at its most overbought level since the second Iraq war in 2003.

Mike Muller, the Asian head for Vitol, the world’s largest independent oil trader, said at the weekend that the market was “getting ahead of itself in terms of a post-vaccine euphoria.”  

Torbjorn Tornqvist, chief executive at Gunvor, another large independent oil trader, expressed concern that crude prices sustained at beyond $60 a barrel might trigger an avalanche of shuttered supply that would ultimately suppress the market.

Others noted that while U.S. crude stockpiles had fallen sharply over the past four weeks, spurring the oil rally, much of that has turned up as gasoline inventories lacking immediate consumption as the pandemic continued to limit driving and mobility.

But some analysts, including Phil Flynn at Chicago’s Price Futures Group, expect the rally to continue. “This has been a story of OPEC cuts balancing the market and the sense of a new oil supercycle as an investment is being shut down due to a global green energy push,” said Flynn.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.