Brent crude and WTI: Oil prices rise as traders close short positions
Oil prices reversed earlier losses to inch into positive territory this morning, however traders warned that the gains were largely due to "technical" movements.
Brent crude, the global benchmark, increased 1.3 per cent to $35.74 per barrel. Meanwhile, West Texas Intermediate crude, the US benchmark swelled 1.33 per cent to $33.51.
But traders said the gains were primarily driven by short positions being closed ahead of Brent's expiry next year.
Short selling is effectively betting an asset will fall. An investor borrows assets to sell them at a pre-arranged price later, making a profit once the price has fallen.
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"It comes more from the technical side of closing positions because of the Brent expiry on Monday," said Daniel Ang, analyst at Singapore's brokerage Phillip Futures.
Oil is traded using futures contracts, which require the delivery of an underlying financial instrument on a specified date. The expiry date is when this comes into effect.
Oil prices were also received support from strong demand for petrol in the US, after data released earlier this week showed US petrol stockpiles declined by 2.2m barrels over the week.
"The idea that gasoline demand is actually rising suggests that perhaps the lower prices of crude are actually prompting a greater usage of this product (gasoline)," Vyanne Lai, oil analyst at National Bank Australia, said.
The oil price leapt by around 10 per cent at the beginning of the week on rumours Saudi Arabia would be able to negotiate a deal with Russia to cut output, though this was ruled out by the Saudi oil minister at an industry conference on Tuesday.