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Crude closes at highest this year while confidence sags in Alberta

Tags: Oil

The price of oil hit a new year-to-date high Monday. West Texas Intermediate has surged more than 40 percent since the February low as hope builds for relief from a global supply glut. But there’s no quick fix for the mood in Alberta. The Conference Board says sentiment in the province has hit an all-time low amid rampant job cuts.

Crude oil rallied to its highest level this year on an improving global outlook and stronger sentiment for a market recovery. The gains were driven partly by a rally that took Asian equities to two-month highs. U.S. energy firms also cut oil rigs for an 11th week in a row to the lowest since December 2009, as producers slashed costs.

U.S. West Texas Intermediate (WTI) closed at US$37.90 a barrel, up $1.98 from the last close.

Brent oil prices shot above $40 a barrel on Monday to their highest level this year after data showed a smaller-than-expected U.S. build in crude stockpiles, while U.S. equity indexes were little changed.

Brent was last up $2.08, or 5.4 percent, at $40.80, while U.S. crude rose $1.95, or 5.4 percent, at $37.84 and hit its highest since Jan. 1. Traders said the gains came as investors were rotating more assets into raw materials amid ideas OPEC producers want a higher anchor price after a selloff that has lasted nearly two years.

Meanwhile, the Conference Board of Canada says consumer confidence in Alberta hit a new low even as nationally the index posted its first gain in three months.

The Ottawa-based think tank says Alberta’s view on current finances and future job prospects reached its lowest ever, falling 3.8 points to 30.4.

The national index climbed 3.7 points in February to 83.7. But, the results were mixed regionally, with Ontario, Quebec and B.C. more optimistic as confidence fell in Atlantic Canada, the Saskatchewan–Manitoba region and Alberta.

Bets on rising brent crude prices hit a record high in the week to March 1, according to data from the InterContinental Exchange, and major OPEC producers are privately starting to talk about a new oil price equilibrium of $50 a barrel, according to New York-based consultancy PIRA.

But analysts warned the glut of physical oil could again weigh on prices. Morgan Stanley said in a research note that "a large portion" of the recent rally was down to U.S. dollar depreciation.

"Thus, prices can continue to rally on headlines and a dollar pullback, but the upside should be limited by bloated global inventories and producer hedging," the note said.

In its "bull case," Morgan Stanley said oil prices could rebound to an average of $90 a barrel by 2020, but that Brent was more likely to reach $80. Its "bear case" sees $65 in 2020.

China imposed a cap on its energy consumption by 2020, marking the first time the world's second-biggest economy has set such a target and casting doubt on its consumption growth.

Technical analysts said charts showed the rally could be near its end. And others warned that rising prices raised the prospect of U.S. shale oil producers hedging their production and increasing rig counts as a result.

"We are now getting very close to where we could see the rig count ticking higher," said Bjarne Schieldrop, chief commodities analyst with SEB in Oslo. "You're going to have some headwinds in the oil price as soon as you see the rig count increase."

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