By Christian Berthelsen And Georgi Kantchev
Oil prices rose Friday as traders anticipated another reduction
in U.S. drilling activity and a survey said OPEC output fell in
February.
Light, sweet crude for front-month April delivery was up 83
cents, or 1.7%, to $49.00 a barrel on the New York Mercantile
Exchange, rebounding from Thursday's four-week low. The Brent crude
contract was up $1.35, or 2.3%, at $61.40 a barrel on the ICE
Futures Europe exchange.
The oil markets have been whipsawing in recent weeks with
investors weighing signs of impending supply cuts and improving
demand against indications of continuing global oversupply. The
market has arrested the steep fall that prevailed from June to late
January but remains volatile as traders assess whether the market
rout is over. Brent, the global price benchmark, is up more than
13% in February while U.S. crude is broadly flat for the month.
Analysts caution the relative stabilization in the market masks
weakness, with the global oversupply of oil continuing to grow and
demand coming from temporary factors such as storing for later sale
at a higher price rather than real-world use.
"The recent strength in oil prices is likely temporary and hides
huge uncertainties with respect to the fundamental balance of the
market," Barclays said in a note. Even accounting for the recent
falloff in production from Libya, the bank estimated the glut would
continue to grow at a pace of 1.2 million to 1.3 million barrels a
day.
Still, there are some emerging signs of stabilization. A Reuters
survey of shipping data and oil companies found that oil output
from the Organization of the Petroleum Exporting Countries fell in
February, as bad weather in southern Iraq delayed tanker loadings
and sailings. The estimated output of 29.92 million barrels a day
was lower than the cartel's official target of 30 million barrels a
day and the lowest level since last June, when the market collapse
began.
Oil prices might still drift lower in the short term as
supply-side support to prices wanes in the weeks to come, JBC
Energy said.
"Iraqi shipments for March should see a considerable lift as
several February cargoes are deferred into March with plenty of
vessels already in place to haul the crude. In the same vein,
basically all onshore production in Libya was shut in following the
sabotage of a key pipeline. Thus, it seems likely that any
potential production and export volume changes will be to the
upside," analysts at JBC wrote in a note.
The latest U.S. rig-count data will be released by
oil-field-services firm Baker Hughes Inc. later on Friday.
Investors in recent months have been fixated on the number as an
indication of eventual supply cuts. The number of rigs drilling for
oil has fallen by more than 35% since October.
Analysts, however, caution that a reduction in the number of
U.S. oil rigs in use doesn't immediately translate to a fall in
output, which is currently running at a multiyear high of 9.3
million barrels a day.
A weaker U.S. dollar on Friday was supportive of oil prices,
traders said. As oil is priced in dollars, it becomes more
attractive to holders of foreign currencies when the greenback
depreciates. The Wall Street Journal Dollar Index, which tracks the
dollar against a basket of currencies, fell 0.1% on Friday after
rallying the previous day.
The premium of Brent crude prices to Nymex oil is at its widest
in more than a year at $12 a barrel, on the back of increasing U.S.
inventories, currently at an 80-year high for this time of the
year.
China's official manufacturing PMI number is expected over the
weekend, and market observers expect it to stay below the threshold
of 50, indicating contraction. The data could have ripple effects
in the market next week, as China is the world's second-largest oil
consumer after the U.S. and a key driver of demand growth.
March gasoline futures rose 3.72 cents, or 2.2%, to $1.7448 a
gallon on the Nymex. March diesel futures rose 8.72 cents, or 4.1%,
to $2.2230 a gallon. The contracts expire with the end of trading
Friday.
Write to Christian Berthelsen at christian.berthelsen @wsj.com
and Georgi Kantchev at georgi.kantchev@wsj.com
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