Crude oil prices are staying in line with the greenback, but oversupply will probably limit gains, as some analysts point out.
Sweet, light crude futures for March delivery surged to $31.10 or 0.7% during the Globex electronic session on the New York Mercantile Exchange. Then, on London’s Ice Futures exchange, April Brent crude surged to $34.33 a barrel or 0.8%.
The director of Commtrendz Risk Management, Gnanasekar Thiagarajan said that for crude oil the near term outlook ranges from neutral to mildly positive. He added prices have dropped so low that there may be production cutback by key producers.
Since a price keeps descending since late 2014, there have been few production cuts except for certain projects in Canada’s onshore as well as oil sands, conventional American onshore projects, not to mention aging British North Sea fields. The overall number of shut-ins won’t most likely grow at the rate some market participants might expect, because most producers hold out, hoping for a price rebound.
Last week weakness in the greenback gave decent support to crude oil prices, but the dollar regained its strength amid a positive labor force report for January, released at the end of last week.