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Oil Price Rebounds On The Comments by The Fed and OPEC

Wed, Jan 14 2009, 04:55 GMT
by Oil N' Gold Team

Oil N' Gold

Crude oil rebounded to 38/39 after slumping to as low as 36.1 yesterday. Fed Chairman Ben Bernanke's speech as well as OPEC members' comments on additional output cut stimulated buying.

On Tuesday, Bernanke said that a $700 billion bailout plan was necessary to rescue the economy and it 'could provide a significant boost to economic activity'. Venezuelan President Hugo Chavez said yesterday in Caracas that they are willing to cut production by even 2M or 4M bpd more to defend price. Moreover, Saudi Arabia Oil Minister Ali al- Naimi said February's output from the Kingdom will be lower than the target set in December.

Despite these, traders probably want to wait for the inventory report by the US Department today for further insights on the demand side. Both surveys by Platts and Bloomberg forecast increase in stockpiles for the week ended Jan 9.

While the majority of analysts surveyed by Bloomberg anticipated inventories of crude, gasoline and distillate rose by 2.75 mmb, 1.5 mmb and 1.5 mmb respectively, Platts' survey anticipated higher supplies at 3 mmb, 1.8 mmb and 1.7 mmb, respectively.

Gold price continues its recovery as oil rebounds and the dollar's rally pauses. USD's movement has been driving gold's performance, especially since the second half of 2009. In US session, the Commerce Department will release retail sales in December. Despite the shopping season, the gauge probably dropped 1.2%, extending the longest monthly decline since the reading began in 1992. Of course, the euro is not expected to rally strong as the Eurozone's economy and ECB's rate decision remains wildcards. The Eurozone's industrial production in November is expected to have plunged 1.8% mom in November, further increasing the chance for the ECB to cut interest by at least 50 bps Thursday.

Published on  Wed, Jan 14 2009, 04:56 GMT