Two important factors, weather freezing in some parts of the Northern hemisphere and short covering both has failed to prevent the global oil price to stay firm. In fact, the short rally was taken as an opportunity to lock profit on Monday as concerns on continued oversupply of oil curbed traders from taking further positions. While Brent LCOc1 shed 67 cents at 0816 GMT, the US crude CLc1 fell 58 cents. However, the saving grace was that the oil price managed to stay above $31 a barrel level.
Record Production In Iraq
In December, Iraq witnessed a record oil production with the help of higher output from its central, as well as, the southern fields. Also, after a big increase in price over the week end, people have started booking profits. Phillip Futures analyst, Daniel Ang, told Reuters that the market continued to remain in the oversupply zone thus resulting in the bearish sentiments.
Though Saudi Arabia-based Aramco Chairman, Khalid al-Falih, indicated cost-cutting due to weak oil prices, the company was not slashing any of its fresh investments in the oil and gas production. Aside from that, Indonesia’s OPEC Governor indicated that there were slim chances of the oil cartel initiating steps to boost the oil prices. That meant the OPEC was not ready to reduce the oil production.
Weak USD Helping Oil Futures
ANZ said that the recent rally was due to a change in sentiment with a bias towards short positions. On the other hand, Morgan Stanley (NYSE:MS) believes that the weak Greenback was driving the oil futures that denominated in the US dollar currency. The brokerage said that a retracement of the Greenback, which would be like the last spring season, was one of the few possible drivers for oil price in the near-term.
The secondary driver would be any marginal changes in the fundamentals of crude supply/demand. That was also much similar to the one witnessed last year. Barclays Research note indicated that the market might face a temporary turnaround if there was no further macro deterioration, as well as, any other bearish sentiments. Weather might continue to hold its part in dictating the price.