Oil price spikes higher on trader bets despite supply glut
Oil rose on Monday to break a three-day losing streak, after futures traders increased their bets on a renewed price upswing even though rising US drilling helped keep physical markets bloated.
Brent crude futures were up by 85 cents at $49 per barrel by midday, after hitting a session high of $49.15. US West Texas Intermediate (WTI) crude futures rose 74 cents to $46.58 per barrel, shy of the day's high of $46.69.
Traders and analysts said the bounce looked technical in nature, after WTI rallied and encouraged a similar move in the Brent market. But they said the move might prove fleeting.
"When you start to approach $45 a barrel in WTI, you're in an area where you do find some price support and I think there has been some evidence last week of investment flows coming back into crude oil," Petromatrix strategist Olivier Jakob said.
"You have to be careful not to be too optimistic for now," he said. "Physical differentials are still under pressure and the time structure is still under pressure in Brent. It's a bit premature to call for much higher oil prices."
Traders said the price rises came as data showed speculative traders had increased their investment in crude futures by taking on large volumes of long positions.
"Oil bulls have reset for a technical bounce," said Stephen Schork, author of the Schork Report.
While financial traders have confidence in rising prices, the physical market remains under pressure, especially due to a rise in US drilling. US drillers added eight oil rigs in the week to June 9, bringing the total count to 741, the most since April 2015, Baker Hughes said on Friday. (Reuters)