Oil Prices Recover from Below $80

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oil (commodities)On Monday, US oil prices recovered after tumbling to a 28-month low of below $80 per barrel. Short-covering assisted in offsetting the losses triggered by Goldman Sachs after it slashed its price estimates.

Goldman Sachs cut forecasts for Brent to $85 per barrel from $100 for 2015’s first quarter and reduced its forecasts for US crude from $90 to $75 citing insufficient demand and rising production.

The slide in both US crude and Brent triggered short-covering, which stemmed losses as market players closed a part of their positions.

Pending home sales data, which was weaker than expected, drove the dollar index lower, leading to the rise of dollar-denominated commodity markets.

According to Reuters, US crude for December declined to $79 per barrel, the lowest from June 2012 before recovering to settle down 1 cent at $81.00 per barrel.

December delivery Brent dropped to an $84.55 low before paring losses and settling down 30 cents at $85.83 per barrel. The spread between US crude and Brent crude thinned to $4.83 per barrel.

Tyche Capital Advisors, Tariq Zahir said, “The main driver today has been the Goldman Sachs report, we are obviously in a down market for Brent and WTI (West Texas Intermediate). However, we have technically been a bit oversold so these little rebounds can be quite violent.”

Oil prices are lower by around 25% from their June highs, pummeled by increased production in Libya, the US, Iraq and other countries, which has created an abundance of fuel and oil in world markets.

Gene McGillian, Tradition Energy analyst was reported by the Wall Street Journal as having said, “The market has sold off so significantly over the last couple months, we’re approaching areas where people are reluctant to get further short. This seesaw trading is going to continue doe a while until we find the bottom.”

November gasoline futures dropped 0.5% or 1.15 cents settling at $2.1702 per gallon while November diesel dropped 0.3% or 0.66 cent to $2.4753 per gallon.

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To contact the reporter of the story: Jonathan Millet at john@forexminute.com