Oil up fifth day on U.S. stock draws; Saudi output threatens rally
By Barani Krishnan
NEW YORK (Reuters) - Oil's rally extended for a fifth day on Wednesday, helped by a weaker dollar and an unexpected drawdown in U.S. crude and gasoline but traders said the run up may not last, pointing to galloping Saudi output and technical factors.
Crude futures have gained as much as 13 percent since Thursday after Saudi Arabia, the kingpin in the Organization of the Petroleum Exporting Countries, stoked speculation that OPEC was ready for an output freeze deal with producers outside the group.
On Wednesday, Brent crude settled up 62 cents, or 1.3 percent, at $49.85 a barrel after touching five-week highs of $49.93.
U.S. West Texas Intermediate (WTI) crude futures rose 21 cents, or 0.5 percent, to $46.79.
Some traders and investors cautioned that crude futures, which slipped into bear market territory in early August after falling 20 percent from this year's highs in June, were looking overbought.
"We've gained too much in too little a time, at least technically, and I think this rally has to stop," said Donald Morton, who runs an energy-trading desk for Herbert J. Sims & Co, an investment banking house in Fairfield, Connecticut.
The Relative Strength Indicator for Brent was near 65, approaching the overbought level of 70, while for WTI it was at 62. Just earlier this month, both benchmarks showed RSI levels of 30 or below, indicating an oversold or bear market.
After three straight weeks of unexpected builds, U.S. crude stockpiles fell 2.5 million barrels last week, the Energy Information Administration said, surprising analysts who had expected a build of 522,000 barrels. Continued...