Oil prices edge up as confidence rises that market has bottomed
Oil prices edged higher on Thursday as sentiment spread that a 20-month-long market rout is coming to an end as production slows amid strong demand.
U.S. crude futures were trading at $34.76 per barrel at 0540 GMT, up 10 cents from their last settlement.
WTI has risen more than a third since Feb. 11, when prices dropped to levels not seen since 2003 at just over $26 a barrel.
Brent futures were up 7 cents at $37.00 a barrel, and up nearly a quarter since Feb. 11.
Traders said the view was spreading that a market rout that has pulled down prices by 70 percent since mid-2014 is over.
“The market recently has suddenly started to focus on bullish headlines. This has created huge inflows, buying from hedge funds,” said Oystein Berentsen, managing director of crude at Strong Petroleum in Singapore.
Reuters technical analyst Wang Tao said that U.S. crude prices ended a multi-year downtrend this week and that WTI prices would target prices above $40 per barrel in March.
The International Energy Agency (IEA) also said this weak that prices had likely bottomed out.
“We saw better data than expected on manufacturing and I think that’s the fundamental shift that’s helping at least the U.S. get more bullish about oil,” said Michael McCarthy, chief market strategist at derivatives dealer CMC Markets in Sydney.
Prices have been driven higher by dipping output in the United States and signs of financial distress in the U.S. oil sector that might signal further production cuts to come.
U.S. crude output fell for a third month in December, down 43,000 barrels per day (bpd) to 9.26 million bpd as struggling oil companies succumb to the price rout.
Despite this, most analysts do not expect sharp price rises soon as production remains above demand and global crude inventories are brimming with unsold fuel.
Globally, analysts estimate that 1 million to 2 million barrels of crude are being produced every day in excess of demand, and an agreement by major producers, led by Russia and Saudi Arabia, to freeze output at January levels will do little to reduce the glut.
Russia in February pumped oil at the same rate as in January at 10.88 million barrels bpd, an almost 30-year high, Energy Ministry data showed on Wednesday.
Output from Saudi Arabia, the Organization of the Petroleum Exporting Countries’ (OPEC) biggest exporter, is also above 10 million bpd.
U.S. crude inventories rose 10.4 million barrels to a fresh record of 517.98 million barrels last week, although Berentsen said he expected inventories to stop swelling by the second quarter due to strong demand.
Source: Reuters
