By Christian Berthelsen And Georgi Kantchev
Oil prices turned higher Friday, bouncing back after U.S.
fourth-quarter economic growth came in weaker than expected.
Analysts attributed the bounce to technically directed trading
as the market recovered from trading below $44 a barrel Thursday
and setting a new nearly six-year low at settlement. It also
followed announcements by several oil producers--including
ConocoPhillips and Shell--that they would cut exploration and
production budgets amid a round of weak earnings. Still, they
cautioned that there was little basis for a strong price rebound in
the market without more substantive changes to the oversupply
situation.
"We see ongoing headwinds for oil prices," Citigroup analyst Tim
Evans said in a note. "Optimists may view the price performance in
the face of bearish news as an encouraging sign, but we continue to
see near-term downside risks."
Light, sweet crude for March delivery was up 45 cents, or 1%, at
$44.97 a barrel on the New York Mercantile Exchange. The global
Brent contract was up 2 cents, or 0.1%, at $49.15 a barrel on the
ICE Futures Europe exchange.
Overall, news in the market was bearish. Fourth-quarter U.S.
gross domestic product came in at 2.6%, below the 3.2% average
estimate of economists surveyed by The Wall Street Journal.
European price data signaled ongoing deflation.
In addition, analysts estimated that the Organization of the
Petroleum Exporting Countries produced more than 30 million barrels
a day of oil in December, in the face of declining demand for the
cartel's output. Saudi Arabia made further reductions to selling
prices for Europe and the U.S., and Iraq production is at or near 4
million barrels a day, according to London oil brokerage PVM Oil
Associates Ltd.
"The market's really fighting a losing battle here," said Andy
Lebow, a broker at investment bank Jefferies. "It's hard to trace a
meaningful recovery in the next few months."
Oil futures have lost nearly 60% of their value since last June,
as surging production from the U.S., Iraq and Libya have flooded
the market at a time of weak demand growth as the global economy
slows. The losses have stabilized somewhat in the last two weeks,
but fundamental factors are expected to continue to deteriorate in
coming months.
Indeed, market participants have been stunned by a pair of
back-to-back U.S. inventory surges in domestic oil stockpiles in
the last two weeks, with production reaching a 31-year high.
"Crude oil is once again dead-cat bouncing," analyst Matt Smith
of research consultancy Schneider Electric said in a note.
"Meow."
Major oil companies have announced spending cuts in recent weeks
to cope with the price rout. Chevron Corp. said Friday that asset
sales and strength in its refining segment helped offset tumbling
crude oil prices, resulting in better-than-expected results in its
December quarter. Still, Chevron said it plans to pare its capital
spending by 13% this year to $35 billion.
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.
Crude's price slump, however, is good news for the global
economy, reducing gasoline 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.
In refined products, February gasoline rose 0.28 cent, or 0.2%,
to $1.3565 a gallon on the Nymex. February diesel rose 0.66 cent,
or 0.4%, to $1.6520 a gallon.
Write to Christian Berthelsen at christian.berthelsen@wsj.com
and Georgi Kantchev at georgi.kantchev@wsj.com
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