By Georgi Kantchev
Oil prices posted gains on Friday, but analysts cautioned that a
sustained recovery is unlikely until there are more signs of
production cuts in the oversupplied global market.
Futures have been moving largely sideways in recent weeks,
oscillating between gains and losses, which some market watchers
have interpreted as the oil price finally bottoming out after its
precipitous fall. Oil has shed close to 60% of its value since
midsummer on a toxic combination of ample global supplies,
lackluster demand for the commodity, and a strong dollar.
On the New York Mercantile Exchange, March-dated WTI futures,
the U.S. price benchmark, flirted with $45 a barrel, up about 1%
from Thursday's settlement. Brent crude, the international marker,
was up 0.7% at $49.50 a barrel on London's ICE Futures
exchange.
"The fall in oil prices will have an effect on supply and there
are signs that production will be cut in the future," said Thina M.
Saltvedt, senior oil analyst at Nordea Bank Norge. "But until we
see those cuts, it is too early for a serious rebound. There is
still a lot of oil floating around."
Oil majors have announced spending cuts in recent weeks to cope
with the price rout. Royal Dutch Shell said Thursday it would curb
its planned spending over the next three years by some $15 billion
and scale back investments in shale. ConocoPhillips also said it
would slash its capital budget as the company reported losses in
the fourth quarter of last year.
"Shell was the first of the major oil companies to report
yesterday and, if its results are representative of what is going
on in the industry as a whole, the outlook isn't pretty," Bill
McNamara, an analyst at Charles Stanley, said in a report.
Even if oil prices have steadied for now and are projected to
rise later in the year as global supply reacts to the lower price
environment, analysts are skeptical about the strength of any
rebound.
Russ Koesterich, managing director and chief investment
strategist at BlackRock, said in a report that "oil prices are
likely to stabilize and rise over the long term, but this won't be
immediate. Nor is the rise likely to take prices back to the upper
end of the previous range."
Meanwhile, Saudi Arabian King Salman bin Abdulaziz has ordered
major changes to his government, including a cabinet shuffle, but
decided to keep veteran oil minister Ali al-Naimi in place.
Mr. Naimi, long one of the most influential oil-price brokers in
the global market, was the main strategist behind the November
decision by the Organization of the Petroleum Exporting Countries
to keep its oil output steady in a bid to protect the cartel's
market share against booming U.S. shale production.
Investec, the international banking and asset management group,
thinks that OPEC is now committed to a "war of attrition," playing
a dangerous game in which it either blinks, or digs in for the long
haul.
"We suspect the latter, despite the inevitable pressures on the
budgets of individual OPEC members," the group said. This would
make for a slow and painful recovery, instead of the V-shaped
bounce in prices many in the oil industry had been hoping for, it
added.
The price slump, however, is good news for the global economy,
reducing gas prices at the pump and providing a boost to economic
growth for net importers of oil.
Barclays estimates that the halving in crude prices in the past
six months, if sustained for the whole of 2015, would mean a
transfer of $1.6 trillion from oil-producing to oil-consuming
countries.
Nymex reformulated gasoline blendstock for February--the
benchmark gasoline contract--rose 0.3% to $1.3574 a gallon, while
ICE gas oil for February changed hands at $479 a metric ton, up
$5.50 from Thursday's settlement.
Eric Yep in Singapore contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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