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BS: US Oil Prices Takes An Optimistic Turn
 
Rallying US stocks climbed 10% on Thursday, as encouraging economic data and investor confidence in US and Chinese stocks prompted the stock holders to withdraw hands from bearish bets.

The weak oil market supply and demand conditions prevailed; traders and analysts at hedge funds, brokerages, and banks have failed to find any substantial fundamental justification for the sudden rally and bullish outlooks towards future price gains. It appeared to be the result of investors covering short-positions to close bets before the market disadvantaged them.

Certain major factors have increased bearish sentiment among investors regarding crude oil. Concerns keep increasing over the continuous excess of global oil supply; new questions arise about China, and greatest of all is the stock market’s trajectory amid decelerating economic growth, coupled with the decision to devalue the yuan by the Chinese central government.
Commodities have been dependent on Chinese demand and have been affected the most during the downturn. However, Thursday brought the highest percentage gains, copper showed most percentage growth in two years, while sugar prices had their largest one-day rally in more than a year. Bloomberg’s Commodity Index gained 3%, which is the greatest seen in three years.

According to last week’s data issued by the US Commodity Futures Trading Commission, financial investors had high expectations since April for crude prices to fall. As the market reached new lows, investors have added to bearish bets have been the first to bail out, when prices start to recover.

The market being in a feat, has been short covering. With 30% contract volumes, the price move is seen to be an exacerbation of “thin-trading” in the market.

The US contract’s benchmark increased 10.3% or $3.96, settling it at $42.56 a barrel. This has been the highest dollar gain seen since March 9, 2009. While it was also highest in percentages, the figures have amplified due to price slump. After setting nearly six-year lows, the market climbed early in the day, gaining momentum later on and rocketing in the last half hour of the trading session.

Brent crude increased 10.3%, landing the price at $47.56 a barrel: the highest one-day dollar gain seen in three years and the greatest percentage gain since December 31, 2008 seen on the ICE Futures Europe Exchange. At the moment Brent crude is at $46.84, after a 1.51% decrease.

In the experts’ opinion macroeconomic -factors such as employment and economic activity have helped stocks rally last week. The overnight Chinese equity rebound with the Shanghai Composite Index rising 5%; its first gain in five trading sessions has been attributed to the macroeconomic environment. US stocks and the Dow Jones Industrial Average (DJIA) also rose during Thursday.

Economic reports have provided encouraging revisions in accordance with these factors; US growth rates have been increased to 3.7% from their initial 2.3%; while weekly job losses have come in lower-than-expected, at 271,000.

The Cushing, Oklahoma hub has been reported to have a mid-weekly decline in US crude supply, as stated by Genscape. However, the private data forecaster declined confirmation. Furthermore, Royal Dutch Shell plc’s (NYSE:RDS.A) Nigerian operating division has closed two pipelines with a daily capacity of 180,000 barrels, according to news agencies. The Organization of Petroleum Exporting Countries (OPEC) has been asked to meet for an emergency meeting by Venezuela. The country has been struggling through the oil price rout.
However, the oil struggle continues as US pumped record oil and stockpiles amounted to 9.3 million barrels of oil a day, according to the Energy Information Administration (EIA) on Wednesday.

While supply and demand remains weak and Autumn approaches, the excess oil supply could potentially drive down prices once again, as refinery operations begin to slow down for maintenance purposes.


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