Crude oil saw a more than $2 jump in trading on the New York Mercantile Exchange Monday, on escalated violence in the Niger Delta, as well as technical factors.
While intra-day trading saw highs crest at $71.92 a barrel, the market ultimately settled at $71.39 a barrel on the NYMEX Monday. An increase of $2.33 since Friday’s close, oil saw a significant rally on the market.
"After last week's rollercoaster ride, the oil market seems to be paying attention again to the equity market," said Gene McGillian, trader and analyst with Tradition Energy in Stamford, Connecticut. "We rallied up to two and a half week closing highs today."
The Movement to Emancipate the Niger Delta (MEND) reported another attack in the region, this time on Shell facilities. Despite the local government's attempts to placate the militant group, violence in the West African OPEC country has been escalating.
"There didn't seem to be a lot of new things that drove the market," explained McGillian. "I know there was an attack over the weekend in Nigeria again, which I think kind of got the ball rolling, but it seems that the market traded a little more technically today than it has been recently. As we crossed through last week's highs, it triggered some fresh buying in the market."
The analyst revealed that technical factors, such as a weaker dollar and stronger equities trading, seem to have helped to push the crude oil market higher.
"The market looks as if some of the factors that drove us up to $73 dollars are starting to take the reigns in the market again," he continued.
"I think that the way that we weathered the trade-off from $73 down to $66 and now we're back above $71, it looks as if we're set to resume."
Economic indicators and the impending US inventory report later this week are anticipated by traders in the market. McGillian revealed that after today's turnaround in the market, $75 a barrel is attainable in the near-term.
"We're going to have to watch out," he warned. "This time, say we get up above the recent highs of $73, and the market all of a sudden looks really weak again, that is probably a sign then that we're starting to find an area of the market where the fundamentals weigh on the market. It's got to have more than slightly improving economic statistics to really drive it through that area."
Staying somewhat steady with less than a cent in losses today, natural gas for August delivery settled at $3.944 mmBtu Monday. Oversupply and dwindling demand have hampered this commodity from gaining strength on the market recently.
"Friday was the expiration date for the NYMEX spot contract, and the market closed today pretty strongly," said McGillian, noting a storm threat in the Gulf of Mexico and even lower natural gas rig numbers reported from Baker Hughes Friday.
While the price of natural gas made another attempt to climb above $4, the market ultimately could not support the gain.
"I think that's just a sign that out of all the energy commodities, it probably has the weakest fundamentals overhanging it, and that has really halted all," concluded McGillian. "We've had three different rallies where the market has tried to get above $4.30 in the last six weeks; and every time the market does get a move going, all of a sudden we see something come in from the fundamental side of the market that just stops it in its tracks, and the market slides back below $4."
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