Traders work the floor at the New York Stock Exchange yesterday.
NEW YORK: Oil prices jumped by the most in weeks on Wednesday, with US crude reaching its highest in more than two months as technical buying and signs of speedier efforts to avert a US fiscal crisis fuelled an abrupt year-end rally.
After trading about $1 a barrel higher earlier in the day, despite a UK holiday that continues to sap liquidity, oil prices jumped by another $1 in the early US hours. Traders attributed the rapid gain to buying at a key technical support level and possible algorithmic short-covering.
Brent crude held most of those gains by mid-morning, up $1.76 or 1.6 percent at $110.56 a barrel by 10.30am EST (1530 GMT), on track for its biggest one-day rise since mid-November. Volume was about one-sixth the average.
Markets were mostly flat on Monday, the last trading day before Christmas. US crude led yesterday’s gains, up $2.17 from Monday’s close to $90.77 a barrel, but trading activity remained subdued. About 150,000 lots had changed hands, roughly a third of the daily norm.
Oil prices dropped more than 1 percent on Friday after US fiscal talks dissolved when Republican lawmakers withheld support for a proposal to avert a raft of tax hikes and spending cuts, but many investors doubt that lawmakers would risk tipping the fragile US economy into recession again.
President Barack Obama will cut short his Christmas holiday to return to Washington early today to resume talks. In the meantime, traders turned to the charts for inspiration.
Friday’s intraday low for WTI crude was a major 50 percent retracement mark, and $88 a barrel was a “big level that a lot of people were watching”, said Bill Baruch, senior market strategist at iitrader.com LLC in Chicago.
Prices have now broken above the 100-day moving average for the first time since October, a move that could set up a test of the 200-day mark at $92.20 a barrel - if the first break holds.
“The market is taking advantage of thin holiday trading, boosting out of its trading range. It’s thin volumes and technical trading,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
Financial markets showed little reaction to U.S. data that revealed a slightly stronger-than-expected rise in single-family home prices, with most eyes still on Washington. US stock markets declined by 0.3 percent.
Reuters
