Crude advanced for a second day, paring its third weekly drop, on speculation that declines were excessive and as the euro increased against the dollar.
West Texas Intermediate oil rose 0.3 percent. Prices gained the most in three weeks yesterday after the 14-day relative-strength index sank below 30 on April 17, a sign the market is oversold, data compiled by Bloomberg show. Commodities gained with the euro after German Finance Minister Wolfgang Schaeuble said in an interview with Wirtschaftswoche magazine that the European Central Bank should reduce liquidity in the euro area.
“We’re still getting a bounce after a big price decline,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “This isn’t an aggressively bearish market because investors are looking at the dips as buying opportunities.”
WTI crude for May delivery rose 28 cents to settle at $88.01 a barrel on the New York Mercantile Exchange. The contract touched $85.61 in intraday trading yesterday, the lowest level since Dec. 11. The volume of all futures was 6.1 percent below the 100-day average for this time of day at 2:44 p.m. Prices fell 3.6 percent this week and are 14 percent lower than a year ago.
Brent oil for June settlement gained 52 cents, or 0.5 percent, to end the session at $99.65 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded today was 19 percent less than the 100-day average. Futures touched $96.75 yesterday, the lowest intraday price since July 2. Brent slid 3.4 percent this week.
The June European benchmark grade was at a premium of $11.38 to WTI futures for the same month. The spread was $10.72 on April 17, the narrowest closing level since Jan. 25, 2012.
WTI rebounded in early March after its relative-strength index slid below 30, a technical indication that futures have fallen too quickly and further losses aren’t sustainable. Today’s reading is about 33.4.
The euro rose as much as 0.6 percent against the dollar, bolstering the appeal of raw materials denominated in the U.S. currency as an investment. The Standard & Poor’s GSCI Index of 24 commodities was up 0.2 percent.
The International Monetary Fund lowered its global economic growth forecasts for 2013 on April 16. The Washington-based fund predicts the world will grow 3.3 percent this year, down from the 3.5 percent estimated in January.
The IMF projection for the U.S. was cut to 1.9 percent from 2 percent, while China was reduced to 8 percent from 8.2 percent. The U.S. and China are the world’s biggest oil-consuming countries, accounting for a combined 32 percent of global oil demand in 2011, according to BP Plc’s Statistical Review of World Energy.
“Concerns about a faltering global economy have been the main driver this week,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
U.S. oil output averaged 7.21 million barrels a day last week, the most since July 1992, the Energy Information Administration said in an April 17 report.
Brent may fall below $95 a barrel in the “near term” if the global recovery stalls, and may slide into a range of $90 to $100 if world economic growth weakens to 3 percent from 4 percent, Francisco Blanch, the New York-based head of commodities research at Bank of America, said in an e-mailed report yesterday. Brent last traded below $95 in June.
Barclays and BNP Paribas SA are among banks that have said this week oil’s decline is temporary.
Venezuelan Oil Minister Rafael Ramirez said that $100 a barrel should be the floor for oil prices and that he will inquire about an extraordinary meeting of the Organization of Petroleum Exporting Countries. Ramirez spoke to reporters in Caracas yesterday. The 12-member group’s next scheduled meeting is on May 31.
“OPEC has to be concerned about the drop in prices but their options are limited, especially given the surge in U.S. output,” Flynn said.
Implied volatility for at-the-money WTI options expiring in June was 25.4 percent, down from 25.6 percent yesterday.
Electronic trading volume on the Nymex was 429,489 contracts as of 2:44 p.m. It totaled 772,647 contracts yesterday, 31 percent above the three-month average. Open interest was 1.76 million contracts.