Brent Rises From Nine-Month Low on Speculation Losses Excessive

Brent crude rose from a nine-month low and West Texas Intermediate advanced for the second time in six days, on speculation that losses were exaggerated.

The European benchmark climbed as much as 1.6 percent, reversing an earlier loss of 1 percent. WTI also added as much as 1.6 percent. Brent’s 14-day relative strength index was at

28.1, a sign prices may have fallen too far. European shares rose after the biggest four-day selloff since July as Italian and Spanish bonds rallied. Brent may slip to a range of $90 to $100, according to Bank of America Corp.

“We do not believe that the timing is there just yet for Brent prices to drop sustainably below $100,” said Torbjoern Kjus, a senior oil analyst at DNB ASA in Oslo.

Brent for June settlement on the London-based ICE Futures Europe exchange increased as much as $1.58 to $99.27 a barrel, and traded for $98.87 at 12:59 p.m. local time. Brent settled at $97.69 yesterday, the lowest close since July 2, after dropping below $100 a barrel this week for the first time in more than eight months. The volume of all futures traded today was 39 percent higher than the 100-day average.

WTI for May delivery was at $87.87 a barrel, up $1.19, in electronic trading on the New York Mercantile Exchange after falling earlier as much as $1.07 to $85.61. It slid 2.3 percent to $86.68 yesterday, the lowest closing price since Dec. 13. The volume of all futures traded was 63 percent larger than the 100-day average.

Brent Premium

The front-month European benchmark grade was at a premium of $10.74 to WTI for the same month. The spread closed at $10.72 yesterday, the narrowest closing level since Jan. 25, 2012.

The Stoxx Europe 600 Index advanced 0.6 percent at 7:20 a.m. in New York, while Standard & Poor’s 500 Index futures added 0.4 percent. Spain’s 10-year bond yield dropped seven basis points to 4.61 percent, and Italy’s fell six basis points to 4.19 percent.

Brent’s 14-day relative strength index fell to 22 yesterday, its lowest since June 21. A reading of 30 or below typically indicates that a market has fallen excessively and is interpreted by traders as an opportunity to buy.

Brent may fall below $95 a barrel in the “near term” if the global recovery stalls and may slide into a lower trading range of $90 to $100 if world economic growth weakens to 3 percent from 4 percent, Francisco Blanch, New York-based head of commodities research at Bank of America, said in an e-mailed report.

The Organization of Petroleum Exporting Countries has no plans for special talks, two OPEC delegates said, asking not to be identified because such discussions are private. An official at OPEC’s Vienna headquarters declined to comment when contacted by phone today. The group’s next scheduled meeting is on May 31.

Brent may decline as low as $90 if OPEC doesn’t signal its readiness to defend prices by restraining supply, said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

“Market sentiment has clearly worsened,” he said.

Before it's here, it's on the Bloomberg Terminal.