Investors who made bets that February oil would fall further closed out their positions, an action called short covering. The February contract was less expensive than the subsequent month’s price, a condition known as contango. The March through February 2010 contracts are down more than $1.
Crude oil for February delivery rose $2.23, or 6.1 percent, to settle at $38.74 a barrel at 2:58 p.m. on the New York Mercantile Exchange, the biggest gain since Dec. 31. More than $7 separated the day’s high and low prices. Futures are down 57 percent from a year ago.
Floor trading was closed for the Martin Luther King Jr. holiday yesterday. Electronic trades were booked today for settlement. The more-active March contract declined $1.73, or 4.1 percent, to settle at $40.84 a barrel.
Rising U.S. stockpiles and forecasts from the International Energy Agency and OPEC for declining world demand contributed to an 11 percent drop in Nymex crude oil last week. Prices are down 13 percent this year, after tumbling 54 percent in 2008.
U.S. inventories probably rose 1.5 million barrels last week, the 15th gain in 17 weeks, according to the median of analyst estimates in a Bloomberg News survey. The Energy Department is scheduled to release its weekly inventory report on Jan. 22, a day later than usual because of yesterday’s holiday.
The oil market needs more speculators to help stabilize prices six months after the traders were blamed for pushing the commodity higher, Deutsche Bank said in a report. A lack of liquidity is distorting prices, particularly for near-term delivery, amid an oversupply of oil at Cushing, said analysts led by Paul Sankey in New York in the report dated yesterday.
Brent crude oil for March settlement declined 88 cents, or 2 percent, to end the session at $43.62 a barrel on London’s ICE Futures Europe exchange.
Two geopolitical crises that bolstered prices earlier this month appear to have been resolved over the long weekend.
Russia and Ukraine signed 10-year natural-gas contracts, ending a dispute that squeezed supplies to the European Union for almost two weeks. Shipments resumed today. More than 20 European countries were affected, as 80 percent of Russian gas exports pass through Ukraine’s pipeline network.