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WTI oil soars 9% to settle at a two-week high
‘Mad scramble’ Friday but analysts doubtful gains will last

Oil prices and world stock markets jumped on Friday, providing some relief to bruised investors as frigid weather across the United States and Europe boosted energy demand.

Brent crude oil, which tumbled in recent weeks on worries about oversupply, settled 10 percent higher and above $32 a barrel in one of the biggest daily rallies ever. Traders cashing in short positions lifted prices along with the higher short-term demand.

The surge in oil prices continues with WTI crude settling at a two-week high above $32 a barrel, but analysts don’t expect the gains to last.

Oil futures jumped 9% on Friday to settle at their highest level in two weeks, rebounding from oversold conditions as traders bet that major central banks will announce fresh stimulus measures that may improve sentiment for the beleaguered commodity.

“Today’s gains by oil are truly spectacular, and the retaking of $30 is a positive,” said Colin Cieszynski, chief market strategist at CMC Markets.

March West Texas Intermediate crude added $2.66, or 9%, to settle at $32.19 a barrel on the New York Mercantile Exchange. That was the biggest one-day percentage gain since Aug. 27 and highest settlement since Jan. 8, according to FactSet data.

For the week, WTI prices gained 9.4% based on last Friday’s closing level for the February contract, which expired Wednesday. The March contract itself was up 5.9% from its settlement a week ago.

Brent crude , the global oil benchmark, rose $2.93, or 10%, to $32.18 a barrel on London’s ICE Futures exchange, set for a weekly gain of nearly 9%.

It was a “mad scramble” Friday to “get back on the bullish bandwagon,” said Cieszynski.

But the “huge pop feels more like a bear-market rally on short covering than a proper base forming. There hasn’t been any change, the price war continues and is likely to continue for a long time meaning that we could still retest or break the recent lows eventually,” he said.

Other analysts also voiced doubts that the price strength will last.

“There is really no fundamental change that can justify this two-day surge in prices,” Robbie Fraser, commodity analyst at Schneider Electric, told MarketWatch. “More than anything, I think we’re seeing a short-covering rally and the impact of unusually high volatility throughout global markets this year.”

However, “until we see meaningful production cuts from key producers, particularly the U.S., I’m not going to feel confident that oil prices have found their bottom,” he said.

European Central Bank President Mario Draghi hinted Thursday at more easing measures amid renewed pressure on inflation in European economies from falling oil prices. Traders were also speculating that Japan’s central bank might increase its asset-purchasing program at its end-of-January meeting. Global bourses bounced on the stimulus talk.

http://stream.marketwatch.com/story/markets/SS-4-4/SS-4-94788/