By Barani Krishnan
Investing.com – Run Bear, Run.
Elaborated with a phenomenal gain of 33% in the first quarter, oil rose nearly 2% in Monday's session, with bulls entering the April trade amid data suggesting deeper cuts in OPEC output and stronger Chinese demand than expected.
Oil traded in New York fell $ 1.45, or 2.4 percent, to $ 61.59 a barrel. It hit a near high of $ 61.72 before the last five months. For the period from January 1 to March 31, the WTI increased by 33%. The last time you earned more for a quarter was during the second quarter of 2009 when it rose about 40%.
The benchmark price of oil, traded in London, rose $ 1.48, or 2.2 percent, to $ 69.06 a barrel at 2:41 pm ET (1841 GMT). It rose 26% in the first quarter, also the best gain in 10 years.
"Oil prices are heating up before the summer season as expectations for global oil demand are rising as global oil production is falling," said Phil Flynn, senior energy analyst at The Price Futures Group in Chicago.
"Just when you thought it was safe to go to the gas pump, we received a report that China's stimulus is starting to manifest as weekly oil production numbers are lowered and US platform count drops," said Flynn. "The possibility of a tightening in supply is increasing, as is the price of oil."
After three consecutive months of contraction, manufacturing activity in China expanded more than expected in March, easing concern over the slowdown of the world's second-largest economy, data showed. China's purchasing managers index, Caixin, rose from 49.9 to 50.8, up from the 50 mark that separates the expansion from contraction and its strongest level since August last year.
Friday's data also showed a sixth-place weekly drop in the US oil-rig count to a nearly one-year low, suggesting lower production ahead. Goldman Sachs (NYSE 🙂 said in an analysis last week that US oil drillers were protecting their output by 2020 despite this year's recovery. This could challenge optimistic US government forecasts for a record production above 13 million barrels per day by 2020.
Despite pressure from US President Donald Trump to maintain oil supply, Saudi Arabia, which wants crude at $ 70 a barrel and above, cut production to 9.82 million barrels in March according to a Bloomberg survey of authorities, analysts and ship tracking data. Production of OPEC's 14 members fell for the fourth consecutive month in March, dropping from 295,000 bpd to 30,385 million.
However, not everyone is buying the upbeat oil narrative beyond a few weeks.
"I think this week may be strong for oil as there is physical support and there may also be a chase in the index world as the more dynamic style indexes have been much more advanced and may try to enter the purchase this week, "said Scott Shelton, energy futures broker at ICAP (LON 🙂 in Durham, NC
"We could also see more CTA purchases, as they have a ton of bullets to shoot overall," Shelton said. "The bottom line for me is that the flows look positive this week and next, but I'm not sure we'll find another buyer after that."