Brent Rallies a Bit on Speculation Downside is Overdone

Brent is up $0.65 while WTI is up $0.02…

“Brent crude rose in London, paring a second weekly decline, on speculation that its plunge to an 18- month low below $90 a barrel was excessive.

Brent’s 14-day relative strength index, a measure of how quickly prices have risen or dropped, was at 19.1 today. A reading of 30 or lower can suggest prices have tumbled too quickly. Brent earlier declined to its lowest since December 2010 after German business confidence fell to the weakest level in more than two years in June, and the Federal Reserve Bank of Philadelphia’s economic index yesterday signaled the biggest contraction in manufacturing in almost a year.

“It’s time for a rebound,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG (RBI) in Vienna. “Below $90 per barrel, the marginal cost projects are not economically viable any more. So some oil companies will have to cut capital expenditure if prices fall further.”

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