As the August rally lost momentum, oil prices jumped higher on Tuesday despite the low trading volumes. The crude hovered around $47 to $50 a barrel and the October contract for global benchmark Brent LCOV6 was up 0.35% at $49.43 a barrel, while the US counterpart West Texas Intermediate CLV6 was up 0.4% at $47.17 a barrel.
These gains are supported by the production suspensions in the US Gulf due to an expected tropical storm. Oil and gas operators in the US Gulf of Mexico have shut output equal to 168,334 barrels per day of oil and 190 million cubic feet per day of natural gas as a precaution against a tropical storm, the US Bureau of Safety and Environmental Enforcement said on Monday.
Another reason for the spike is the speculation that meeting of major producers, including members of the OPEC, in Algeria next month will act to prop up prices or could yield a production deal to support prices.
Despite these gains, the markets are expected to remain stagnant until next week as Monday’s bank holiday in UK cut into trading volumes for mentioned benchmarks, as well as the similar holiday taking place this weekend in the US.
Olivier Jakob from the Switzerland-based Petromatrix said that technical momentum is stalling and there are no obvious signs out there that suggest prices will change that much in the next week. He also said that August rally had been driven by short covering, another tem for buying back oil contracts that were sold at a higher price, and now that has ended, the market is drifting.
According to Dominick Chirichella from the New York-based Energy Management Institute said in a note that waning interest in a possible production-freeze deal from major producers were one factor that observers believe that oil prices have reached their peak for now, and will be on the defensive as bearish fundamentals start to have an impact. He also noted the stronger dollar and the prospect of Nigeria increasing exports if a deal is brokered with militants as other negatives that could weigh oil prices in September.
US Gas Prices
As oil prices rose, US gas prices also hiked. For the third consecutive week, the price of regular unleaded gas increased about 4 cents in the past week to $2.24 a gallon, according to the latest figures from the Department of Energy. Even at this height, US drivers have enjoyed a summer with the cheapest gas prices in about a decade, still 27 cents less than they were paying for on this date a year ago.
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