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Mon 25 Jan 2016 09:04 AM

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Oil price sees biggest two-day rally in 7 years

Oil is still down about 13 percent this year and may take as long as three years to normalise, with a speedy rebound unlikely, according to Bank of Montreal CEO

Oil price sees biggest two-day rally in 7 years

Oil fluctuated near $32 a barrel after the biggest two-day rally in more than seven years.

Futures slid as much as 0.8 percent and gained as much as 1.4 percent in New York. Front-month prices capped a 21 percent advance over two sessions at the close Friday after the February contract expired Wednesday at $26.55 a barrel, the lowest since 2003. Hedge funds reduced record bets on falling prices ahead of the rally, data from the U.S. Commodity Futures Trading Commission shows.

“Once the buying started, it became a scramble,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “The long-term downtrend remains in place and until we crack that, the market has to remain cautious.”

Oil is still down about 13 percent this year as volatility in global markets adds to concern over brimming US stockpiles and the prospect of additional Iranian exports. Prices may take as long as three years to normalise and a speedy rebound is unlikely, Bank of Montreal Chief Executive Officer William Downe said in an interview in Davos, Switzerland, on Friday.

West Texas Intermediate for March delivery was at $32.41 a barrel on the New York Mercantile Exchange, up 22 cents, at 11:34 a.m. Hong Kong time. Total volume traded was about 83 percent above the 100-day average. The contract rose $2.66 to $32.19 on Friday. Front-month prices gained 9.4 percent last week.

Brent for March settlement was 19 cents higher at $32.37 a barrel on the London-based ICE Futures Europe exchange. The contract gained $2.93, or 10 percent, to $32.18 Friday. Prices climbed 11 percent last week. The European benchmark crude was at a discount of 1 cent to WTI.

Speculators’ short position in WTI, or wagers on falling prices, dropped by 16,782 contracts, or 8.4 percent, to 184,193 futures and options in the week ended Jan. 19, according to CFTC data. Longs fell by 4,580 to 266,150, bringing the net-long position up 12,202 to 81,957.

New York crude capped a second annual loss in 2015 as the Organisation of Petroleum Exporting Countries effectively abandoned production limits to defend market share, exacerbating a global glut. Ecuador and Venezuela are proposing output quotas for OPEC to increase prices, a statement published in Ecuador presidency’s official gazette shows.

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