Cart (0)
business newsCrude Oil Holds On to Week's Gains After High Inventories Threaten Rally
At the same time, analysts didn't see incentive for prices to move above current levels this week with the front-month July contract set to expire tomorrow.
PRINT
 |
|
Crude oil futures held on to strong gains for the week in lackluster Friday trading, after higher-than-expected inventories earlier in the week threatened to cut short the rally.
At the same time, with the front-month July contract set to expire on Tuesday, analysts didn’t see much incentive for prices to move above current levels this week.
The benchmark West Texas Intermediate contract settled at $77.18 a barrel on Friday, locking in a gain of 4.6% for the week, compared with $73.78 a week earlier. The August contract, which becomes the benchmark on Wednesday, settled at $78.26 a barrel.
The weekly inventory report from the Energy Information Administration on Wednesday showed crude stocks increased 1.69 million barrels in the week ended June 11, compared with the consensus forecast for a decline of 1.3 million barrels.
Futures markets initially shrugged off the report, and, spurred by a rising stock market, pushed prices up on Wednesday to a $77.67 high for the week. Doubts set in again on Thursday, and the price fell below $77 a barrel before recouping some of the ground on Friday.
A new report put out under the aegis of the Organisation for Economic Co-operation and Development, the Paris-based grouping of industrial countries, purported to establish that increased trading by index funds didn't contribute to price volatility in futures markets.
The report was authored by two Illinois university professors, Scott Irwin and Dwight Sanders, who have build an academic career on debunking the notion that speculation causes volatility. Not surprisingly, they found once again in their new study that there was “no evidence” to establish a link between large inflows of capital into commodity investment funds and increased volatility in crude oil prices.
The report comes as a conference committee in the US Congress is putting the final touches on regulatory reform legislation that will impose limits on most futures positions.
The authors analyzed data from the Commodity Futures Trading Commission from 2006 to 2009 -- a period in which crude oil prices shot up to $147 a barrel and then fell to $33 a barrel.
Even Gary Gensler, the CFTC chairman, expressed the opinion in congressional testimony during his confirmation hearings last year that the rapid growth of commodity index funds and increased hedge fund allocation to commodity assets contributed to the “bubble in commodities prices that peaked in mid-2008.”
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
