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February 16, 2007

Oil stuck around $58 in range-bound trade

 
February 16, 2007

LONDON: Oil hovered around $58 a barrel on Thursday, under pressure from waning investor enthusiasm while cold weather in the United States provided modest support.

US crude for March delivery was 11 cents higher at $58.11 a barrel by 1333 GMT. London Brent crude for April was up 32 cents at $57.75. Prices fell more than a dollar on Wednesday after US government data showed heating oil stocks had declined less than expected.

A snow storm in the US northeast, the world’s biggest heating oil market, helped to spur some buying interest, but the impact was limited because the northern hemisphere winter is drawing to a close. A spell of unusually mild weather helped to push US crude prices to a 20-month low of $49.90 on January 18 and although prices have since recovered, they have faltered around $60 a barrel.

Technical analysts, who base price forecasts on the study of charts of previous price movements, have said the market lacks the momentum to go higher and will probably stay volatile and rangebound.

They say investors, as well as speculative hedge funds, are favouring active positions, both buying and selling futures. Typically, institutional investors, such as pension funds and high-net worth individuals, have taken up only long positions.

“Asset allocators have got cold feet given what’s happened to oil, copper and zinc,” said David Bowers, independent consultant to Merrill Lynch. “Commodities is not where it’s at.” Another set of US government data for release at 1530 GMT on Thursday will provide a snapshot of US natural gas storage, which could at least temporarily provide market direction. The data is expected to show a decline of 252 billion cubic feet (bcf), just shy of the record draw of 260 bcf set in January 1997, according to a Reuters survey of analysts.