Oil futures took a breather from a selloff in Asian trade Friday
as investors sought for signs of tighter supply that could stem
further declines in oil prices.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in February traded at $46.56 a barrel at 0419 GMT, up
$0.31 in the Globex electronic session. March Brent crude on
London's ICE Futures exchange rose $0.25 to $48.52 a barrel.
Oil prices had fallen again in the last trading session, with
Nymex WTI crude now down by around 13% year-to-date and Brent crude
down by around 17%.
James Hubbard, 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," he said by phone.
He said below the $40 level, around 1.5 million barrels a day of
oil supply becomes cash flow negative and when most of these
producers start losing money they will eventually start shutting
down supply.
"[Oil prices] could go down by another $10 and I don't see a
whole lot to stop it at the moment. But given that we started at
$115, we're very close to the bottom now," Mr. Hubbard said.
Oil companies are already making spending cuts and backing down
from large projects, and lot of these cuts will become clearer with
the next round of corporate earnings being announced soon.
BP PLC said Thursday that it would lay off about 300 people in
the North Sea hub of Aberdeen, Scotland, and Houston-based energy
company Apache Corp. said it was laying off around 250 employees
this week.
Later today, the International Energy Agency will publish its
monthly oil market report. Yesterday's report from the Organization
of the Petroleum Exporting Countries had a mixed impact.
OPEC lowered its forecast for oil supply growth from non-OPEC
members, but it also cut its forecast for world oil demand growth
in 2015 by 70,000 barrels a day from its last report.
Oil markets are also feeling some of the impact after the Swiss
National Bank removed its currency cap against the euro, analyst
Daniel Ang at Singapore's Phillip Futures said in a report. He said
a surge in the U.S. dollar index and the weaker euro were weighing
on oil prices.
Nomura Securities said in a report that there was little
evidence to suggest the greenback's rise is near a conclusion, and
is reluctant to advise a floor in the oil price slide.
Nymex reformulated gasoline blendstock for February--the
benchmark gasoline contract--rose 83 points to $1.3077 a gallon,
while February diesel traded at $1.6297, 64 points higher.
ICE gasoil for February changed hands at $471.50 a metric ton,
down $1.50 from Thursday's settlement.
Write to Eric Yep at eric.yep@wsj.com
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