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Oil Prices Bounce Back After Christmas Eve Slump


Last Wednesday, December 26, 2018, oil prices surged a high daily gain, the strongest in two years. The surge bounced back from considerably steep losses which brought crude oil benchmarks to its lowest since 2017.

Upon OPEC’s landmark agreement to cut production signing, both the U.S. and Brent crude hit about 8 percent. This is the most significant daily increase since November 30, 2016. Although it is still unclear at the moment, a follow-through purchase might make the prices higher when trading desks become fully staffed at the start of 2019.

According to John Kilduff, a founding partner at energy hedge fund Again Capital, the bounce back that occurred on Wednesday caused a “relief rally” to happen after the Monday slump. This is because of the energy complex gaining an increase from the fluctuating equity market. With the Dow Jones Industrial Average having a boost of more than 1000 points, it has posted its biggest daily point gain of all time with the Christmas Eve slump being the worst on record. Kilduff even compared what happened to the “tumult across the market” to the “end of the world,” and perfectly described the bounce back like how “the sun came up today.”

At $3.69, or 8.7 percent, at $46.22, the U.S. West Texas Intermediate crude futures concluded Wednesday’s session. It is how they rebounded from the 6.7 percent slump last Monday. They have also traded a 10 percent higher close to $47 per barrel after the settlement.

On the other side, Brent crude oil futures, which is considered to be the global benchmark, increased up to $4 (or 7.9 percent) to $54.47. Earlier, it has fallen into their lowest rate since July 2017 with $49.93 and hit a 6.2 percent decrease in the past session. Brent crude oil futures also got boosts after the settlement to exchange more than 9 percent higher above $55 per barrel.

The crude oil prices and supplies have been at the weaker receiving end in the. The U.S. Government shutdown, increased U.S. interest rates, as well as the U.S.-China trade dispute have dramatically affected the crude oil market by worrying investors over global growth. The Vice President in Market Intelligence at DrillingInfo located in Denver said how the market is concerned about the demand for oil, believing that $45 is still too low.

According to Credit Suisse, funds have experienced substantial losses in the oil market in 2018 with the Commodity Trading Adviser fund (CTA) down by 7.1 percent throughout the year until mid-December. The funds were gambled in oil market’s favor, just to witness the oil prices decrease by more than 40 percent from its high rates in October.

Igor Sechin, the head of Russian company Rosneft, has predicted oil price to be at the range of $50-$53 this 2019, which is considerably less than the $86 by Brent crude oil four-year peak this year.

But all in all, the predictions for the oil prices this year isn’t as bad as it was back in 2016, since this time OPEC is propping the market up, as stated by Olivier Jakob, an analyst at Petromatrix. OPEC. This is along with Russia and their other allies have decided this December 2018 to decrease the production in 2019, in contrary to the decision in June to produce more oil. The group also plans to cut down on the products by 1.2 million bpd in 2019.