- January 16th, 2015
Oil Moves Higher on IEA Comments
Oil futures rallied on Friday after the International Energy Agency said a price recovery might be in sight.
Crude has lost more than half of its value since last summer as a combination of ample supply and lackluster demand spooked the markets.
Brent crude rose more than 3% to $49.80 a barrel on London’s ICE Futures exchange. Brent, the global oil benchmark, was down 12 out of the past 15 sessions bringing its year-to-date decline to more than 15%.
The U.S. price benchmark traded at $47.52 a barrel, up more than a dollar from Thursday’s settlement on the New York Mercantile Exchange.
“A price recovery, barring any major disruption, may not be imminent, but signs are mounting that the tide will turn,” the IEA said in its closely watched monthly oil market report on Friday.
In a sign that Organization of the Petroleum Exporting Countries’ strategy to defend its market share may be working, the IEA slashed its forecast for the increase in non-OPEC oil supply this year by 350,000 barrels a day, saying that the production cut is expected to bolster demand for OPEC’s own output.
The 12-member oil cartel decided in November not to cut output despite the price rout as it sought to protect its position in the market threatened by the booming U.S. shale industry.
The head of Asian oil and gas research at Macquarie Group, said that prices below $40 a barrel would make it difficult for producers to break even, prompting them to begin limiting production.
“Once WTI goes below $40 a barrel and thereabouts you’ll start to see headlines of production starting to shut in, in North America and potentially in the North Sea,” Mr. Hubbard said.
Major oil companies are already busy laying off workers and cutting their budgets as crude’s price has fallen close to 60% since a peak in June.
Schlumberger Ltd, the world’s largest oil-field service company, said Thursday that it laid off 9,000 workers late last year, reducing global head count 7%. Also on Thursday, BP PLC announced it would lay off about 300 people in the North Sea hub of Aberdeen, Scotland.