Azernews.Az

By Bloomberg

Oil headed for the biggest two-week rally since March 1998 in London as price volatility rose to the highest in almost six years.

Brent crude climbed 9.3 percent this week, adding to an 8.6 percent gain last week. The CBOE Crude Oil Volatility Index, which measures price fluctuations using options of the U.S. Oil Fund, ended at 63.14 on Thursday, the most since April 2009. Saudi Arabia cut prices for March exports to Asia to the lowest in at least 14 years, signaling OPEC’s largest producer may continue to fight for market share.

Oil has rebounded as companies including Statoil ASA, BP Plc and Royal Dutch Shell Plc have reduced investments in response to the market’s collapse. U.S. companies pulled a record number of oil rigs off U.S. fields, according to data from Baker Hughes Inc. Jan. 30. The company will publish its latest rig count Friday. U.S. government data showed crude stockpiles in the world’s largest consumer surged to the highest level in more than three decades.

“Volatility is at a six-year high as the market is struggling to gauge what theme to go with,” Ole Hansen, head commodities analyst at Saxo Bank A/S in Copenhagen, said by e- mail. “Is it falling rig count and capex or the continued rise in U.S. inventories and the Saudi actions?”

Brent for March settlement increased as much as $2.07 to $58.64 a barrel and traded for $58.24 at 9:28 a.m. on the London-based ICE Futures Europe exchange. It’s up 19 percent since Jan. 23. The European benchmark crude traded at a premium of $6.08 to WTI.

Saudi Oil

West Texas Intermediate for March delivery climbed as much as $2.01, or 4 percent, to $52.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract advanced $2.03 to $50.48 on Thursday. Total volume was about 68 percent above the 100-day average for the time of day.

Saudi Arabian Oil Co. reduced its Arab Light official selling price for March by 90 cents to $2.30 a barrel below a Middle East benchmark, an e-mailed statement on Thursday showed. The state-owned company raised the grade’s premium for sales to the U.S. after six months of cuts.

Saudi Arabia led a decision in November by the Organization of Petroleum Exporting Countries to maintain its collective output target at 30 million barrels a day. The 12-member group, which pumps about 40 percent of the world’s oil, produced 30.9 million barrels a day in January, exceeding its quota for an eighth straight month.

Refinery Strike

The United Steel Workers union, representing 30,000 workers at more than 200 refineries, fuel terminals, pipelines and chemical plants, instructed all units on Thursday to decline a sixth proposal from Shell, according to Lynne Hancock, a union spokeswoman in Nashville, Tennessee. Shell is negotiating on behalf of companies including Exxon Mobil Corp. and Chevron Corp. in discussions that would serve as the foundation for local talks.

The Obama administration is monitoring the developments, Frank Benenati, a White House spokesman, said in an e-mailed statement.

Statoil will deepen spending cuts by 30 percent to $1.7 billion from 2016 and reduce capital expenditure to $18 billion this year from earlier targeting $20 billion, the Stavanger- based company said today.

The move followed similar announcements by competitors including Shell, BP and Chevron Corp. that they would cut billions of dollars in investments.

Fuel Stockpiles

In Europe, oil traders are storing 5.799 million metric tons of gasoline, diesel and other processed fuels in independent tanks in Amsterdam, Rotterdam and Antwerp, PJK International data show. That’s the highest level in estimates dating back to 1995, Pieter Kulsen, the Breda, Netherlands-based company’s founder, said by phone.

U.S. crude inventories expanded to 413.1 million barrels in the week ended Jan. 30, the most in weekly records compiled since August 1982, according to the Energy Information Administration.

WTI may drop next week, according to a Bloomberg News survey of analysts and traders. Twelve of 32 respondents, or 38 percent, predict futures will decline through Feb. 13, while 10 forecast an increase.