Oil Soars in Biggest One-day Rally in Years
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Oil rocketed as much as 10 percent higher on Thursday, posting its biggest one-day rally since 2009 as recovering equity markets and news of diminished crude supplies set off a short-covering surge by bearish traders.
Snapping back from a deep two-month slump that reached 6-1/2 year lows this week, oil climbed as world stock markets rose on hopes Chinese government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased.
The rally was aided by news of a force majeure on Nigerian oil exports declared by Shell (RDSa.L) and private data indicating more drawdowns in crude this week at Cushing, Oklahoma, traders said. A big upward revision in second quarter U.S. economic growth helped.
More than reversing the past week's losses, front month Brent crude LCOc1 for October rose $4.07 to $47.21 a barrel, a 9.43 percent gain. Gains accelerated toward the close, heading toward the biggest one-day rally since early 2009, when prices were bouncing back after the financial crisis. The contract traded on Monday at a March 2009 low of $42.23.
"Whenever you have a short-covering rally in a bear market they’re always violent. I wouldn't be surprised to see it continue another day or two," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York. As buying pressure eases, prices may test new lows, he added.
U.S. crude CLc1 rose $4.00 to $42.60 per barrel, showing its biggest one-day percent gain since early 2009. It had hit a February 2009 low of $37.75 on Monday.
Shell declared force majeure on Bonny Light crude oil exports on Thursday following the shutdown of Trans Niger Pipeline and Nembe Creek Trunkline, which can carry around 180,000 barrels per day (bpd) of crude.
(By Barani Krishnan and Jonathan Leff; Additional reporting by Lisa Barrington, Robert Gibbons, Barani Krishnan and Catherine Ngai; Editing by Marguerita Choy and Chris Reese)
