Crude oil futures extended gains Monday following a surge at the end of last week on short-covering and fuel demand triggered by freezing weather in parts of the northern hemisphere.
Oil prices soared 10 percent on Friday, one of the biggest daily rallies ever, as bearish traders who had taken out record short positions scrambled to close them, betting the market’s long rout may finally be over.
Brent had gained 39 cents or 1.21 percent to $32.57 a barrel by 0519 GMT, after touching $32.69 a barrel earlier in the day. It settled at $32.18 a barrel in the previous session.
U.S. crude rose 30 cents or 0.93 percent to $32.49 a barrel, compared with its session-high of $32.64 and previous settlement at $32.19.
“A change in investor sentiment was the key factor, with speculative short positions in WTI falling from historically high levels the previous week,” ANZ said in a note on Monday, referring to U.S. West Texas Intermediate crude.
“Low crude oil prices continue to negatively impact high cost U.S. oil producers. Indeed, recent Baker Hughes data suggested U.S. oil explorers idled more oil rigs this week.”
Morgan Stanley said that a weaker U.S. dollar rather than fundamental factors were supporting oil futures denominated in the greenback.
“A notable USD retracement, similar to last spring, remains one of few potential near term catalysts for oil prices … Marginal changes in crude supply/demand fundamentals will likely be secondary drivers to crude oil flat price action, in our view, similar to what we’ve witnessed the past year.”
Reuters market analyst for commodities and energy technicals Wang Tao said on Monday that Brent oil faces resistance at $32.72 per barrel, and may hover below this level for one day or retrace to support at $30.98, before rising again.
A massive snowstorm on the U.S. East Coast helped stoke demand for oil for heating, helping push up crude prices. While New York and Philadelphia were getting back to business, Washington was not ready after an historic storm dumped more than 20 inches (51 cm) of snow on the city and nearly three feet (1 metre) in surrounding areas.
Asian stocks moved further away on Monday from four-year lows struck last week, while the dollar was steady at 118.795 yen.