Oil prices break out of weeklong price slide

The price differential between New York crude and London Brent oil hit a record of more than US$11 last week, which analysts attributed to soaring energy stockpiles in the United States.

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'It’s very simply profit-taking going into a three-day holiday,' analyst says



Prices on Thursday closed at their lowest level of the year at $33.98 a barrel, and appeared headed back toward the January and February contract lows of $32.48 and $32.70 as oil inventories continue to soar during the worst recession since at least the 1980s.

Oil broke out of a weeklong slump Friday, soaring 10 percent, as traders prepared for a long Presidents Day weekend.

Light, sweet crude for March delivery rose $3.53 to settle at $37.51 a barrel on the New York Mercantile Exchange. Prices rose as high as $38.25 in afternoon trading.

“It’s very simply profit-taking going into a three-day holiday,” said Phil Flynn at Alaron Trading Corp.


Traders had been selling the March contract all week and buying the April, May, June and July contracts, but that changed Friday, he said.

After opening above $42 a barrel Monday, crude prices have tumbled every day as traders showed little optimism that a $790 billion stimulus package and the Treasury Department’s plan to spend more than $1 trillion to help remove banks’ soured assets from their books would perk up the economy — and oil consumption — anytime soon.

The House on Friday passed the stimulus package 246-183 with no Republican help. It now goes to the Senate where a vote was possible late Friday to meet a deadline of passing the plan before a recess begins next week.


The Energy Information Administration said Wednesday that crude inventories for the week ended Feb. 6 jumped 4.7 million barrels to 350.8 million barrels, surpassing analyst expectations and climbing toward levels last seen in the summer of 1990 when Iraq invaded Kuwait. U.S. oil storage sites, including the main depot in Cushing, Okla., are brimming with crude, reflecting the drop-off in demand.

“During the last week, we have had fresh estimates for oil demand which now forecast the biggest decline in consumption in more than a quarter of a century,” Peter Beutel of Cameron Hanover said in his Friday report. “We have had a merciless unemployment report showing a decline in January of nearly 600,000 jobs, and we have had yet another increase in crude oil stocks, leaving inventories at their highest levels in 15 years, and creating the biggest surplus against the previous year since 1990. These factors have worked together to press crude prices right back against their spine of support.”

Traders did not read much into Friday’s jump in price, noting that markets will be closed because of the holiday Monday.

“I think people are taking some money off the table,” oil analyst and trader Stephen Schork said.