http://www.foxbusiness.com/story/markets/commodities/oil-rises-near--investors-eye-opec-cuts/Crude oil continued its march toward $50 per barrel on Monday, settling at three-month highs on hopes the Organization of Petroleum Exporting Countries will cut production and amid new tensions between the U.S. and China.
After nearly eclipsing $49 per barrel, crude settled up $1.55, or 3.41%, at $47.07 -- the highest level since Jan. 6. The commodity has now risen two straight sessions and four of the last five.
Oil prices surged after the Associated Press reported the Pentagon said five Chinese ships harassed an unarmed U.S. Navy vessel Sunday following several days of “increasingly aggressive” acts by Chinese ships. White House press secretary Robert Gibbs said Monday the U.S. has protested the action and said China must observe international law.
“I think this story has got oil traders running for cover,” said Phil Flynn, vice president of Alaron Trading. “Unless this story really expands, more than likely cooler heads will prevail and prices will come back down."
Crude ultimately failed to make a run at $50 per barrel on Monday, settling well below that psychologically-important level.
"When you look at the fundamental picture and economic picture it makes you wonder if we are able to sustain $50 per barrel,” said Tom Bentz, director and senior energy analyst at BNP Paribas Commodity Futures, citing high inventory levels and bleak economic news. “It’s still hard to get bullish on crude above $50 per barrel.”
Analysts said crude was also lifted Monday by a new report signaling OPEC may further slash output when the cartel meets on March 15 in Vienna.
"If necessary, we will at our meeting mid-March once again decide a production cut," OPEC President Jose Botelho de Vasconcelos told German news magazine Der Spiegel, according to Dow Jones Newswires.
OPEC slashed production by 4.2 million barrels per day in late 2008, but the global economy has weakened significantly since then.
“They have been signaling there will be another production cut. Is it bullish? Yes, it is. I don’t know if it justifies a $3 rally in oil in and of itself,” said Flynn.
The combination of the Chinese tensions and OPEC production hopes overshadowed a strong day for the dollar, which would ordinarily push crude prices down. While the greenback was flat against the euro, it was up 2% to $1.3791 per British Pound.
Oil has also been helped by technical factors, including the narrowing spread of "contango," which is the condition where prices for distant delivery exceeds spot prices.
Additionally, last week oil managed to escape its $33 to $45 trading range, which was a "pretty bullish event," said Bentz.
Monday's rally follows the commodity’s third straight weekly gain, which was capped off by a 1.7% jump on Friday. Oil settled last week at its highest level since Jan. 26 but is still off by more than 60% from its Nymex record close of $145.29 per barrel, hit in July 2008.
Other energy gauges closed mixed on Monday as heating oil fell 1.40 cents per gallon, or 1.14%, to $1.2154, but RBOB gasoline gained 0.29 cents per gallon, or 0.22%, to $1.3351. Natural gas sank 8 cents per million BTU's, or 2.03%, to $3.865.
Meanwhile, gold futures fell sharply Monday, giving back all of Friday’s gains. The price of an ounce of gold settled at $917.70, down $24.40, or 2.59%. After testing its all-time record of $1,003 per ounce, gold has slumped in recent weeks despite an onslaught of negative economic stories, ending in the red nine of the last 11 sessions.
Silver prices also slumped, falling 37.30 cents per troy ounce, or 2.80%, to $12.95.
Topic: Oil Creeping up $47 a gallon - Opec Cutting Production again (Read 503 times)