Saturday, February 14, 2015 12:28 am
World oil prices rose Friday as the market found reasons to hope for a decline in US oil production and improved demand in the eurozone.
US benchmark West Texas Intermediate for March delivery closed at $52.78 a barrel, a gain of $1.57 from Thursday’s close.
Brent North Sea crude for April, the international benchmark, leapt $2.24 to $61.52 a barrel in London trade, crossing above $60 for the first time this year.
“The story is mostly about optimism the oil demand will pick up after solid numbers in the eurozone,” said Phil Flynn of Price Futures Group.
Economic activity in the eurozone was up slightly in the fourth quarter, expanding by a better-than-expected 0.3 percent after a 0.2 percent rise in the third quarter, according to official data released Friday.
The currency bloc’s fourth-quarter growth was led by a 0.7 percent gain in Germany, Europe’s largest economy, that also beat estimates.
On the supply side, the market was supported by a new attack on a petroleum site in Libya which could disrupt production, and, notably, by another drop in the number of rigs in operation in the United States.
According to the Baker Hughes US drilling rig count, the number of rigs in operation fell by 84 this week (7.4 percent) to 1,056.
“The people that are bearish argue rig counts cuts don’t matter because the rigs that are taken off are ones that don’t produce much oil,” Flynn said. “But my take on it: If you think it won’t have an impact over time, you’re mistaken.”
Some analysts remained skeptical that there will be a sustainable rebound in the price of oil, which has shed about 60 percent of its value since June.
“News of companies forecasting falling output and layoffs in the oil and gas industry is stoking the expectation that oil production will correspondingly reciprocate and drop off precipitously (spoiler: it won’t),” said Matt Smith of Schneider Electric in a market note.
A US stockpiles report Wednesday showing crude reserves standing at an 80-year high for this time of the year has exacerbated concerns about a global supply glut.
Tim Evans of Citi Futures said that Friday’s action, extending strong gains Thursday, was a technical recovery as investors rebalanced their portfolios.
“We note that the actual physical fundamentals remain deep in bear market territory,” Evans said, citing a first-half 2015 global supply/demand balance that looks like a 1.4 million barrel per day surplus.
“The rally has distracted the market from this physical reality, but it still represents a material downside risk in our view.”