Oil rebounds from 12-year low as equities rally, shorts cover

Thu Jan 21, 2016 3:11pm EST
 
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By Devika Krishna Kumar

NEW YORK (Reuters) - Oil prices rebounded over $1 a barrel from 12-year lows on Thursday, their biggest daily gain this year, as rallying financial markets gave some bearish traders reason to take profits on record short positions.

U.S. crude vaulted back toward $30 per barrel as hopes for easier monetary policy from Europe fueled a recovery in stock markets in European and on Wall Street.

Prices did not falter on U.S. data showing a larger-than-expected rise in record high crude and gasoline stockpiles. Instead, the report triggered buying among traders who had feared the figures could be even worse.

Still, few traders expected a quick recovery from this year's slump of more than 25 percent, amid pressure from a deepening supply glut and signs of economic weakness in China - the world's No. 2 oil consumer.

"The fundamentals are still weak and you still have worries about economic growth and its impact on fuel demand, so this is probably a sign that things have been overdone more than anything else," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

He said the market was going to be vulnerable to small turnarounds, given this year's freefall.

Benchmark Brent LCOc1 futures for March delivery rose $1.37 to settle at $29.25 a barrel, a 4.9 percent gain. U.S. crude CLc1 rose $1.18 to settle 4.2 percent higher at $29.53 per barrel.

Brent rose as much as 7 percent during the session to $29.84, while WTI rose as much as 6.7 percent to $30.25.   Continued...

 
A worker checks the valve of an oil pipe at Nahr Bin Umar oil field, north of Basra, Iraq December 21, 2015.   REUTERS/Essam Al-Sudani