Oil is pulling from the market’s biggest storm in seven years.
A measure of price volatility has tumbled in the highest level since January 2009 as the market frenzy eases amid a potential pact between your world’s largest producers to freeze output.
Investors in February fixated how and when Saudi Arabia would engage other producers clamoring for a way to boost prices. Crude in New York crashed by about half because the biggest producer within the Organization of Petroleum Exporting Countries led the group’s 2014 decision not to to cut output in the face of a global glut, opting instead to keep taps open to force out higher-cost rivals.
From the “successful” talks between Saudi Arabian Oil Minister Ali al-Naimi and the Venezuelan counterpart early recently, towards the Feb. 16 Saudi-Russia output freeze announcement, to Iran’s rejection from the plan as “ridiculous,” the CBOE Crude Oil Volatility Index averaged the highest level since 2009. Because the pact was announced, the measure of expectations of price swings has tumbled to the lowest in almost 8 weeks while oil has gained about 18 percent to trade near $35.
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“Because the Saudis and Russia reached an agreement to freeze output, volatility on the market has eased and oil prices have stabilized using the focus shifting back to fundamentals,” said Hong Sung Ki, a senior analyst at Samsung Futures Inc. “More stable oil prices are expected in the coming months, possibly as much as the $40 level, a minimum of until the next OPEC meeting in June.”
U.S. benchmark West Texas Intermediate crude has climbed a lot more than 30 percent since dropping towards the minimum in 12 years last month, and what food was in US$34.45 a barrel at 9:20 a.m. London time. Aggregate trading volumes have declined from a record high reached Feb. 11 while aggregate open interest has decreased from a February peak.
U.S. production slid for a sixth week with the week ended Feb. 26 to 9.08 million barrels a day, the lowest level since November 2014, according to the Energy Information Administration. That’s a long run of declines since September.
Key people in OPEC plan to meet with other producers in Russia this month to resume talks on the freeze deal, according to Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu. You will see a “dramatic price movement” when the gathering takes place, he explained Thursday.
“The question is, if the deal falls through, would we see that much of a retreat within the oil price? I think we’d probably still see it staying above $30,” said Angus Nicholson, an analyst at IG Ltd. in Melbourne. “A lot of the movement higher was greatly on whispers and rumours, nonetheless, it’s managed to hold.”
Bloomberg.com
