Oil clings to $60 in tug-of-war, looks for support from central banks

Madrid-Spain (Dec 11)   Hopes for stimulus from global central banks and strong U.S. data were keeping crude above the key $60 mark Thursday, but it was a tug-of-war as investors remained wary that the sellers aren’t done yet.

On the New York Mercantile Exchange, light, sweet crude for delivery in January CLF5, +0.05%  fell 27 cents, or 0.4%, to $60.66 a barrel. Wednesday marked the lowest settlement since July 2009 on the New York Mercantile Exchange for the commodity, at $60.94 a barrel.

January Brent crude LCOF5, +0.42% eased 11 cents to $64.15 a barrel on London’s ICE Futures exchange. Wednesday’s settlement of $64.24 a barrel was Brent’s lowest settlement since July 2009 as well.

Central-bank booster:  Strong U.S. retail-sales data, combined with central-bank action, were providing some support for oil, said Phil Flynn, senior market analyst at the Price Futures Group.

‘The more stimulus people have, the more money, and then they buy more oil.’

Phil Flynn 

Oil rose in European trading hours in electronic trading after a string of central-bank news. The European Central Bank’s second auction of cheap loans, or the targeted longer-term refinancing operation (TLTRO), came in short of expectations, which to many makes it easier for ECB President Mario Draghi to expand quantitative-easing action.

Meanwhile, Russia hiked rates, while Norway cut rates, as both countries seek to battle the effects of lower oil prices on their economies. “The more stimulus people have, the more money, and then they buy more oil,” Flynn said. “It seems like central banks will not stand idly by and let us fall into deflation.”

On Wednesday, the U.S. Energy Information Administration reported rising oil inventories; expectations had called for a decrease. An oversupply of oil due to rising U.S domestic production and expectations of weak demand for crude have been piling on crude-oil prices.

Marc Faber says developed-world children will be the first generation in 200 years to have a lower standard of living than their parents. But he is optimistic about prospects for kids in emerging markets.

Also Wednesday, the Organization of the Petroleum Exporting Countries announced that it sees less demand for its own oil next year.

Reporters managing to snag Saudi Oil Minister Ali al-Naimi on the sidelines of an annual U.N. climate-change conference in Lima, Peru, on Wednesday were treated to this quote: “Why should we cut production? Why?” He had been asked whether he thought OPEC would need to cut oil production prior to the cartel’s next meeting in June.

Analysts said the comments were a blow to an already-weak market. See: Here are the real reasons oil is plunging towards $60.

What floor? Tumbling crude prices had a crippling effect across global markets, driving the worst rout in U.S. stocks in two months on Wednesday as the energy sector crumbled. But Wall Street stocks were pushing higher on Thursday, helped by that strong retail-sales data. See: This global map of oil production says a lot about the commodity’s plunge.

Flynn said $60 a barrel for WTI crude is the support level the market is targeting, in a market that he said looks “very oversold.” Still, the ground gained so far Thursday may amount to a dead-cat bounce. “The market is showing some stability but not really giving us the sense this thing is all over,” he said.

Where could it go? If oil drops below that key $60 level, then $55, $50 and even $40 are possibilities, he said.

Source: MarketWatch