World oil prices surged this week after recent heavy losses, aided by signs of tightening US supplies according to analysts. Crude futures shot higher in volatile trading as data revealed production cuts that could curb the supply glut. The Baker Hughes North America rig count fell sharply in the week to January 30, dropping by 128 rigs to 1,937. That compared with 2,393 a year ago.
"Oil... has enjoyed the combination of weakening supply and rising demand fundamentals to maintain its surge," said Chris Beauchamp, market analyst at trading firm IG. "Oversupply does not disappear overnight, however, and the jury is still out on whether this bounce (in prices) has much further to run."
Crude futures were hammered Wednesday by official data showing another increase in US crude inventories, hitting 30-year highs. WTI shed nearly $5, or almost nine percent in one day, echoing a price plunge in Brent that was the steepest since November. Oil prices plunged by about 60 percent from their June peaks to a six-year low last week, largely owing to a surge in global reserves boosted by robust US shale production.
The problem was exacerbated in November after the Opec cartel insisted that it would maintain output levels despite plunging prices. The 12-nation group pumps about 30 percent of global crude. By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in March soared to $58.08 a barrel from $49.65 one week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for March rallied to $50.48 a barrel compared with $45.35.
Coupled with a modest gain in wages, the much better-than-expected report suggested the US labour market is beginning to tighten after years of slack, economists said. The department reported that 257,000 net new jobs were generated last month, the 11th straight month of growth above the 200,000 level.
It confirmed expectations that the Federal Reserve will begin raising near-zero interest rates in the middle of this year, if not earlier. "Due to optimism that the Federal Reserve will raise interest rates this year being reaffirmed once again, gold is coming under pressure," said Jameel Ahmad, chief market analyst at trading group FXTM. By Friday on the London Bullion Market, the price of gold dropped to $1,241 an ounce from $1,260.25 a week earlier. Silver grew to $17.22 an ounce from $16.92. On the London Platinum and Palladium Market, platinum increased to $1,239 an ounce from $1,221.
Palladium advanced to $786 an ounce from $775.
The People's Bank of China said in a statement the reserve requirement ratio would fall by 0.50 percentage points, effective from Thursday. The last time the central bank implemented an across-the-board cut in reserve requirements was May 2012. "Base metal prices were supported by China's... cut. We expect copper prices to benefit too," said Natixis analysts in a note to clients. By Friday on the London Metal Exchange, copper for delivery in three months rose to $5,677 a tonne from $5,468 a week earlier.
-- Three-month aluminium rallied to $1,878.50 a tonne from $1,863.50.
-- Three-month lead increased to $1,860 a tonne from $1,845.
-- Three-month tin declined to $18,920 a tonne from $19,250.
-- Three-month nickel gained to $14,920 a tonne from $14,720.
By Friday on Liffe, London's futures exchange, cocoa for delivery in May dipped to £1,911 a tonne compared with £1,917 for the March contract a week earlier. On the ICE Futures US exchange, cocoa for May climbed to $2,777 a tonne from $2,707 for the March contract the previous week.
By Friday on Liffe, the price of a tonne of white sugar for delivery in March edged up to $382.50 from $382.40 a week earlier. On ICE Futures US, the price of unrefined sugar for March slid to 14.57 US cents a pound from 14.77 US cents.