By Ese Erheriene
Oil prices rose in Europe on Monday in response to the
Organization of the Petroleum Exporting Countries increasing its
demand growth forecast for 2015 by 110,000 barrels a day and
reducing non-OPEC supply growth by 420,000 barrels a day.
The move to reduce non-OPEC supply was seen as a response to
falling rig counts, which have declined faster than the market
expected.
"This is what we expected in the sense that they were very high
to begin with. At current prices, such a huge part of non-OPEC
supply is uneconomic that you would expect this kind of revision to
take place," said Amrita Sen, chief oil analyst at Energy
Aspects.
At noon, Brent crude for March delivery rose 0.6% to $58.16 a
barrel on London's ICE Futures exchange. On the New York Mercantile
Exchange, U.S. crude futures for delivery in March recently traded
at around $52.51 a barrel, up %1.6 from Friday's settlement.
Earlier in the session, they had been lower for the second
session in a row as some market participants start to believe the
market has started to bottom out after an eight-month slump.
Oil prices are more than 50% lower than they were in June last
year, but slowly some of the supply and demand factors appear to be
leveling out, say analysts.
There is "credible fundamental support for the view that oil
found a bottom at around $45/bbl. on Brent and is now trying to
find a new equilibrium," said analysts at research firm PVM.
A number of investors are buying up oil to store it on land and
sea, cashing in on the fact that oil prices are likely to be
considerably higher in the future. According to PVM, this provides
an additional layer of demand, which helps keep prices higher.
On the supply side, a number of major exploration projects have
been postponed. While that won't have much effect for several
years, it adds to positive sentiment.
Additionally, the number of U.S. oil rigs in operation declined
again last week, by 83, which takes the total decline since the
start of the year to 342. At 1,140, the number of rigs that are
currently working is at its lowest level since December 2011, and
down 29% since a record high as recently as October 2014.
However, there data from China may cap any stronger gains.
Crude oil imports for China in January weighed in at 6.6 million
barrels a day--a decline of 8% month-on-month. While the previous
month had been a record for imports, the surprising factor was that
year-over-year oil imports were also down slightly despite low
prices, said Commerzbank.
"If China were to buy less in future, this would increase the
oversupply on the oil market and make it more difficult for oil
prices to recover further," said Commerzbank.
Brent crude for March delivery rose 0.6% to $58.16 a barrel on
London's ICE Futures exchange. On the New York Mercantile Exchange,
U.S. crude futures for delivery in March recently traded at around
$52.51 a barrel, up %1.6 from Friday's settlement.
Write to Ese Erheriene at ese.erheriene@wsj.com
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