Energy

Oil prices dropped considerably today, following rumours that a hedge fund has been forced to liquidate substantial commodity positions.

Brent crude slipped by 61 cents at $114.99 a barrel, the largest daily fall in 2013, while US crude also dropped by 73 cents to $94.49, reported Reuters.

On Thursday, traders were persistent in liquidating long positions, as oil prices dropped below support levels on technical charts, leading to more sell-offs.

Regulatory and exchange data have showed that since the middle of December 2012, hedge funds and similar large speculators have increased their bets two-fold on expectations that oil prices will jump.

Traders have accumulated positions in Brent and US crude oil futures and options equivalent to around 440 million barrels of oil.

On the other hand, the American Petroleum Institute data showed that US crude stocks jumped on higher imports, while oil product inventories dropped last week.

"Brent crude slipped by 61 cents at $114.99 a barrel, the largest daily fall in 2013."

The data showed that crude stockpiles increased by three million barrels in the week to 15 February, as imports jumped 117,000 barrels per day (bpd) to 7.72 million bpd, while analysts polled by Reuters had predicted crude stocks would rise by 1.8 million barrels.

According to the oil industry sources, Saudi Arabia, the world’s top oil exporter, might increase its oil output in the second quarter to meet higher demand from China and support economic recovery in other parts of the world.

Investors are also keeping a close watch on the oil inventories data from the US, which is expected on Thursday, as well as negotiations on Iran’s controversial nuclear programme next week, to get a direction for price.

A Western diplomat was quoted by Reuters as saying that major powers are prepared to make "a substantial and serious offer" to Iran, during the upcoming discussion next week, in return for some compromise on its nuclear programme.


Image: Traders continued to liquidate long positions, as oil prices dropped below support levels on technical charts. Photo courtesy of freedigitalphotos.net / sakhorn38.

Energy