Crude oil futures kept falling back from highs even though speculative funds increased their bets that prices are headed higher. The benchmark West Texas Intermediate contract ended the week at $80.68 a barrel, after nearing $83 earlier in the week, compared to $81.24 a week ago.
Saudi Arabia's oil minister, Ali Naimi, made it clear once again on Tuesday that the world's largest oil producer prefers a range of $70 to $80 for oil prices. Speaking to journalists in Vienna prior to and OPEC meeting, Naimi said the oil-exporting group, which accounts for 40% of daily oil consumption, won't let tight supplies push prices too high.
Further bearish factors were the increase of 1 million barrels in U.S. crude oil inventories in the weekly report from the Energy Information Administration and renewed strength of the dollar amid continuing concern about Greece's fiscal situation.
A report in The Wall Street Journal on Friday suggested that EIA collection methods for the oil inventory data may be flawed, according to internal agency documents obtained by the newspaper. Greece said on Thursday it might have to call on the International Monetary Fund for aid if its efforts to reduce its deficit are not successful.
But bulls were encouraged by the Federal Reserve's reiteration that interest rates would remain low and by OPEC's decision to leave production volume unchanged, indicating their belief that prices would remain firm. The benchmark oil contract settled at $82.93 on Wednesday.
However, the move by the Reserve Bank of India to raise its key rates on Friday drove oil prices down amid fears that China and other emerging economies might follow suit and dampen demand for oil.
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The U.S. Commodity Futures Trading Commission reported that non-commercial traders increased their net long position in light sweet crude to 109,314 lots in the week ended March 9, compared with 91,417 lots in the previous week. The increase in the net long position indicated that speculative traders expect oil prices to rise.
In the meantime, the Futures Industry Association, a lobby for the big futures and options traders, urged the CFTC not to follow through on its plan to adopt position limits for energy futures.
"FIA is not aware of any convincing or even credible evidence that large traders with speculative positions in energy futures markets have trumped market fundamentals as the determining factor in energy futures prices," FIA president John Darmgard wrote in a comment letter on the CFTC proposal.
The FIA official went on to say that there is no evidence that position limits in agricultural futures have changed speculative behaviour in any way. Imposing limits on U.S. traders, the FIA says, will only put them at a disadvantage in international markets.
This article was written by Darrell Delamaide for Oilprice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at: www.oilprice.com
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