Oil holds at $32 after biggest two-day rally in seven years

'Once the buying started, it became a scramble' at the end of last week.

An oil pump works as Al Fursan, the aerobatics demonstration team of the UAE Air Force, performs during the Bahrain International Airshow in Sakhir, Bahrain. Hasan Jamali / AP Photo
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Oil fluctuated near $32 a barrel after the biggest two-day rally in more than seven years.

Futures slid as much as 0.8 per cent and gained as much as 1.4 per cent in New York. Front-month prices capped a 21 per cent advance over two sessions at the close Friday after the February contract expired Wednesday at $26.55 a barrel, the lowest since 2003. Hedge funds reduced record bets on falling prices ahead of the rally, data from the US Commodity Futures Trading Commission shows.

“Once the buying started, it became a scramble,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “The long-term downtrend remains in place and until we crack that, the market has to remain cautious.”

Oil is still down about 13 per cent this year as volatility in global markets adds to concern over brimming US stockpiles and the prospect of additional Iranian exports. Prices may take as long as three years to normalise and a speedy rebound is unlikely, Bank of Montreal chief executive William Downe said in an interview in Davos, Switzerland, on Friday.

West Texas Intermediate for March delivery was at $32.41 a barrel on the New York Mercantile Exchange, up 22 cents, at 11.34am Hong Kong time. Total volume traded was about 83 per cent above the 100-day average. The contract rose $2.66 to $32.19 on Friday. Front-month prices gained 9.4 per cent last week.

Brent for March settlement was 19 cents higher at $32.37 a barrel on the London-based ICE Futures Europe exchange. The contract gained $2.93, or 10 per cent, to $32.18 Friday. Prices climbed 11 per cent last week. The European benchmark crude was at a discount of 1 cent to WTI.

Speculators’ short position in WTI, or wagers on falling prices, dropped by 16,782 contracts, or 8.4 per cent, to 184,193 futures and options in the week ended January 19, according to CFTC data. Longs fell by 4,580 to 266,150, bringing the net-long position up 12,202 to 81,957.

New York crude capped a second annual loss in 2015 as Opec effectively abandoned production limits to defend market share, exacerbating a global glut. Ecuador and Venezuela are proposing output quotas for OPEC to increase prices, a statement published in Ecuador presidency’s official gazette shows.


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