Oil bounces back after 6-day sell-off

NEW YORK: Brent crude oil has gained more than 1 percent, snapping a six-day losing streak as low prices lured bargain hunters back to the market.
Reports showing a gauge of future economic activity fell in March and factory activity in the mid-Atlantic region contracted in April briefly sent both Brent and US crude oil down before they resumed their upward climb.
A rise in jobless claims added to Thursday’s less-than-supportive data and the weak economic news pressured US equities. The weaker dollar index helped give dollar-denominated oil prices a boost.
Brent’s 10-percent price slide this month and US crude’s drop in four out the previous five sessions left prices technically oversold, traders and analysts said.
“We haven’t seen any change in the fundamentals, so the view that we’re in oversold territory is probably true,” said Gene McGillian, broker and analyst at Tradition Energy in Stamford, Connecticut, adding that traders with long bets on crude oil prices had likely eased their liquidation selling.
Brent crude futures for June delivery rose $ 1.44 to $ 99.13 a barrel by 1726 GMT, having swung sharply from $96.75, its weakest since July, then up to $99.47.
US front-month May crude was up $ 1.27 at $ 87.95 a barrel, after earlier shedding more than $1 to $ 85.61, a 2013 low. The session high was $ 88.31.
The relative strength index (RSI), a technical momentum indicator, was at 28 for Brent and 33 for US crude.
A reading of 30 or below indicates an oversold condition to chart-watching traders, and Brent has been below 30 for the past five trading sessions.
“A lot of the selling has already been done,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
“The data reflect the fears that we played out early this week and last week.”
US heating oil HOc1 was also up by more than 1 percent.
US gasoline RBc1 traded largely sideways, up less than 1 cent. In its Wednesday report, the US Energy Information Administration said demand for gasoline was at a 16-year low.
“Refinery utilizations are back up to above 86 percent, so we’re starting to see production pick up but demand hasn’t,” said McGillian.
Tony Machacek, a broker at Jefferies Bache, said there was scope for further weakness in coming sessions.
“The market looks a tad oversold on a technical basis, but after the price consolidates, it won’t look so stretched on a relative strength basis, and we could see another leg lower.”
Supply concerns supported crude oil prices, especially Brent, after Royal Dutch Shell RDSa.L on Wednesday declared force majeure on Nigerian Bonny Light crude exports after shutting down the 150,000-barrel per day (bpd) Nembe Creek pipeline for repairs.
Europe’s Amsterdam hub posted a 4.6 percent weekly drop in gas oil stocks due to strong demand in European markets.
Oil price gains may be capped by concerns about political uncertainty in the euro zone, where Italy’s parliament failed to elect a president in its first vote on Thursday.
Picking a leader is seen as a crucial step toward resolving a stalemate since the inconclusive election in February and for the government to carry on with fiscal reforms.
Traders and analysts already are bracing for a possible reaction from the Organization of the Petroleum Exporting Countries to the recent price plunge, with many of the member governments seeing revenue needed to balance budgets evaporate.
OPEC members will discuss holding an emergency meeting if oil prices stay below $100 a barrel, Iran’s oil minister said as reported by Iran’s Press TV, an idea that received little initial support from members across the Gulf.
The next OPEC meeting is scheduled for May 31.
“Oil prices below $100 per barrel could be short-lived as rumors are already beginning to circulate about a concerted move toward a drop in oil production from OPEC, in a repeat of what happened last year when oil dropped below $90 per barrel,” Gary Hornby, an energy analyst at Inenco, said.
ìThis could well force oil traders to start purchasing again after the steep falls we have seen, even before any potential production cut is agreed.”
Seaborne oil exports from OPEC, excluding Angola and Ecuador, will fall by 220,000 bpd in the four weeks to May 4, British consultant Oil Movements said in its weekly estimate on Thursday.