Oil surges in about-face as some bet sub-$60 Brent won't last

Wed Dec 17, 2014 3:40pm EST
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By Barani Krishnan

NEW YORK (Reuters) - World oil prices jumped as much as 6 percent on Wednesday before closing off their peaks as weeks of nearly non-stop selling abruptly halted, and traders said failure to break below key chart support levels meant a long rout may be running out.

The surge came after weekly oil data showed a big build in crude stockpiles at Cushing. When prices failed to make a new low following the bearish data, speculators raced to buy up contracts or take profits on short positions, setting off a frenzy of buying that took on its own momentum.

"I think the market, after its free fall, is looking for any reason to spike up. You're going to see volatility here," said Daniel Flynn, energy analyst at Chicago's Price Futures Group.

The sudden spike on Wednesday caught traders and analysts by surprise, and many speculated on causes ranging from the surge in the value of the oversold Russian rouble to the U.S. decision to resume diplomatic relations with Cuba.

Brent for February delivery settled up $1.17, or 2 percent, at $61.18 a barrel. It rose as much as $3.39, or 5.6 percent, during the session.

Brent's next technical resistance was at $63.50, or 10 cents above its $63.40 peak on Wednesday, one trader said.

U.S. crude's front-month contract settled up 54 cents, or 1 percent, at $56.47 after climbing earlier to $58.98. The market pared gains further after the close, intermittently slipping into negative territory.

The biggest slide in oil prices since the 2008 financial crisis had accelerated after OPEC met in November, when Gulf producers resisted calls to curb output.   Continued...

A gas pump is seen hanging from the ceiling at a petrol station in Seoul in this June 27, 2011 file photo. REUTERS/Jo Yong-Hak/Files