US crude rose nearly 2 percent on Monday, recovering slightly after moving within a hair of 11-year lows, but analysts and traders said it is still too early to declare the market has reached its bottom.
Both US and global benchmark Brent crude have been tumbling downward since an OPEC meeting December 4 at which the oil-producing countries removed their production ceiling, exacerbating global crude oversupply. Monday’s close marked the first significant rebound since the meeting.
Early in the day, both Brent and US crude futures fell by as much as 4 percent to their lowest levels since the start of the 2008 financial crisis, before turning around midday in the United States.
Early in the session, Brent traded just 13 cents above the $36.20 low set in December 2008. Below that level, it would be at its lowest since July 2004, when oil was rebounding from single-digits lows hit during the 1998 financial crisis and when talk of a commodities super-cycle was just beginning.
But the rebound from these near record lows may be short-lived.
“Crude cannot sustain any kind of significant rally until we see the fundamentals begin to shift,” said Matthew Perry, partner with Kronenberg Capital Advisors. Crude may fall further before the macro-economic changes needed for a recovery occur, he said.
“Rebounds off $35 overnight aren’t necessarily bullish or a structural change,” said Phil Thompson, vice president of market analytics at Mobius Risk Group in Houston. Because the market remains dominated by traders with short positions, the rebound does not necessarily indicate a macro-reversal, he said. “The market’s really sore. It’s very, very oversold.”
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