Oil climbs further on short-covering, Brent at over $32

“The turnaround in market sentiment post-ECB continued, with oil prices surging and equities rallying”, they said.

Last note, we shared that price appeared to be bouncing off a key level of support drawn from an 18-year chart from the nadir to the high, but that the short-term focus of resistance rested on the 2016 opening range.

Crude oil futures spurted Rs 60 to Rs 2,316 per barrel today after speculators widened their bets, tracking a firming trend in Asia.

The Bank of Japan will also conclude a two-day policy meeting on Friday, at which sources familiar with its thinking say it is likely to cut its core consumer inflation forecast for the coming fiscal year to possibly below 1 percent.

U.S. crude rose 5 cents to $32.24 a barrel, compared with its session-high of $32.64 and previous settlement at $32.19.

Australian markets will be closed tomorrow for the Australia Day public holiday.

“Investors did generally pull money from funds linked to oil producers (in the last week)… but energy sector funds attracted fresh money for the fourth straight week and 13th time in the past 14 weeks”, exchange-traded product monitor EPFR said. The market will be watching very carefully to see how quickly Iran can rebuild output capacity and probably will need a couple of months to fully price this in.

“Any parent would tell you that that is hardly the way to encourage long-lasting good behaviour”.

Brent crude, the global benchmark, was down $1.35 at $30.83 a barrel at 0851 GMT, losing more than 4 percent from Friday’s closing price, when Brent surged 10 percent. In Russia, which counts on energy for about 50 per cent of budget revenue, the MICEX index jumped 2.4 per cent on Friday to its highest level since Jan 6. Trade in the yen has been somewhat more circumspect, but it still gained 1.5% on Friday.

Among the near-term developments cited which drove their cautiousness the research team cited: the disappointing December OPEC meeting; the onset of higher Iranian exports; some big stockbuilds in recent United States inventory data, the recent China and related market turmoil; further USA dollar strength, notably against and EM currencies, and a significant increase in speculative selling pressure on crude in the futures market.

Expectations are rising that the BoJ will ease further but Governor Kuroda gave no hint as to what he will do at Davos, saying in a Bloomberg interview that ” we don’t think the current market situation has been affecting corporate behavior unduly. He did, however, emphasize that the central bank is “carefully” watching markets for any potential impact on the real economy.