The assurances by Saudi Arabia that Russia is set to get involved in OPEC as regards making supply cuts to decrease a persistent glut and positive US jobs data have caused a recovery of oil prices from a five-months low. Consequently making oil prices closed at 1.5% higher on Friday.
Some speculators had to evade the high stands because the market held in a technically oversold territory with futures selling down as low as 19% all the way from highs in the mid-April. Both contracts continued to witness a steady fall until Thursday when the drastic fall took place with about 5% decline. This collapse caused the WTI to fall to $43.76, which is recorded as its lowest since the 15th day of November, and a downfall to $46.64 being it’s lowest since Nov. 30 when OPEC reached an agreement to slash production during the first half of 2017.
Both standards diminished after the OPEC governor from Saudi Arabia made it clear that the OPEC nations and non-OPEC ones were a little distance away from sealing an agreement to extend a deal to reduce the production by 1.8 million barrels per day for about six months starting from the first day of January. A Saudi official said that according to the present data, there are speculations that a six-month extension may be right to ensure that the market balances again, but the exact extension period is not yet defined. OPEC sources on Thursday said that OPEC may extend cuts when it sits again on the 25th day of May, but it may not be possible to agree on a deeper cut.
According to the data by government, the United States witnessed a job growth, reducing the unemployment rate to 4.4%. The U.S Bank’s private client group’s regional investment manager, Mark Watkins stated that the jobs report is highly active and yielding for the US economy, and as such, it should help in boosting the demand for oil. Notwithstanding the gains on Friday, both benchmarks depreciated in a row for a third week, with WTI going down by 6% and Brent by 5%.
The president of a Chicago-based advisory firm, Jim Ritterbusch has pointed out that the energy complex is gradually concurring to the idea that the OPEC production’s cuts this year have remained ineffective. He further stated that they feel that OPEC has come to a point where they need to take a re-direction to increase production curtailments by doubling down the present effort.
The traded volumes by Brent reached and recorded a high of about 542,000 contracts on Thursday; this suggests a possible scenario that hedge funds had gone up with the decrease in their long positions. A familiar market source said that Pierre Andurand which is a big name in the hedge funds that specialize in oil is running a subtle risk now because he converted his fund’s last long positions in oil lately.
The Schork Report is a US commodity analysis company said that the time is now to set up a defense or run a high risk of motivating the bears to operate at the $40 lower limit for WTI.