Oil market rebounds, lifted by IEA report

The US benchmark futures contract, West Texas Intermediate for February, advanced $2.44 to close at $48.69 a barrel on the New York Stock Exchange.

Brent North Sea crude for delivery in March, the European benchmark, settled at $50.17 a barrel in London trade, up $2.50 from Thursday’s closing level.

“The IEA have hedged their bets somewhat by saying the tide may turn,” noted CMC Markets analyst Michael Hewson.

He added that the “market is very oversold and was probably due a rebound”.

Crude futures have more than halved since June, crashing on worries over global oversupply and weak demand in a faltering world economy.

“How low the market’s floor will be is anyone’s guess,” said the IEA in its monthly report Friday.

“A price recovery — barring any major disruption — may not be imminent, but signs are mounting that the tide will turn,” it said.

The IEA cautioned that prices were expected to keep falling in the short term, with a potential rebalancing of the market coming in the second half of this year, as demand did not appear to be picking up.

“With a few notable exceptions such as the United States, lower prices do not appear to be stimulating demand just yet,” said the Paris-based energy watchdog agency.

“That is because the usual benefits of lower prices — increased household disposable income, reduced industry input costs — have been largely offset by weak underlying economic conditions, which have themselves been a major reason for the price drop in the first place,” it added.

It slashed non-OPEC supply growth projections for 2015 by 350,000 barrels as energy companies ax budgets and cancel projects amid the oil price slump.

But it left unchanged its oil demand forecast for 2015: growth of 0.9 million barrels a day to 93.3 million barrels.

“The yo-yo effect of the crude oil prices can be attributed to the uncertainty in the market,” said Shailaja Nair of energy information provider Platts, pointing to an “unstable dollar” and an “irregular equity market”.

“OPEC has just forecast a drop in demand for its oil this year and this could mean that the price rally we saw this week is unlikely to last,” she said. (AFP)