Oil Price Collapse: Maybe This is the Time to Buy, Says Analyst

Bjarne Schieldrop, chief commodity analyst at SEB, said "there were a lot of people on the sidelines waiting for an opportunity to buy."

Oil prices Monday rallied again and exchange data for last week showed oil speculators raised the number of long positions held for Brent crude, suggesting a fall in oil prices may have bottomed out, Reuters reports.

"There were a lot of people on the sidelines waiting for an opportunity to buy," Bjarne Schieldrop, chief commodity analyst at SEB, was separately quoted as saying.

"Brent has struggled sideways for a long time but it closed above the 20-day moving average on Friday for the first time since July, and the rig count is falling sharply. So now they think, maybe this is the time to buy."

Oil's recent rally of three consecutive market days has seen prices rise by some 11 percent.

"We could get a pretty good bear market correction here," said Walter Zimmerman, Chief Technical Analyst at United-ICAP, suggesting the oil price had hit a low and could rebound.

"In fact, at this point, I would rather just take profits on shorts and resell if the price low is broken."

Data released last week revealed the biggest fall in the number of U.S. producing rigs for 30 years, suggest a slowing down of U.S. oil production and alleviating some concerns about an oil glut.

But the market remains particularly volatile, with futures prices fluctuating as much as $4 per barrel, and oil inventories data for last week show a net increase of 2.3 million barrels in Cushing, U.S., alone.

Volatile Market

"I don't think anything's changed fundamentally, except for the psychology of the market," said Chandravir Ahuja, Analyst at Kolmar Americas Inc. (Kolmar).

"We're moving a lot more on headlines than we probably would on a normal day."

Zimmerman said prices could rise to $61 per barrel for Brent and $59 per barrel for U.S. crude.

In January Brent settled below $50/bbl for the first time in almost six years.