By Georgi Kantchev
LONDON--Oil prices started the week in negative territory on
expectations that a sustained recovery is still a long way off.
U.S. crude snapped a seven-week losing streak last week after
bullish comments by an international energy watchdog. But analysts
said they see little evidence that the combination of oversupply
and sluggish demand that has pummeled prices since last summer is
abating.
Brent crude for March delivery fell 1.3% to $49.52 a barrel on
London's ICE Futures exchange. On the New York Mercantile Exchange,
light, sweet crude futures for delivery in February flirted with
$48 a barrel in recent trade, down 1.5% from Friday's
settlement.
"Despite a nearly 60% fall in oil prices since mid-2014, oil
market balances remain weak, with prospects of a recovery looking
dim until the latter months of 2015," Barclays analysts said in a
report over the weekend.
Oil markets rallied on Friday after the International Energy
Agency lowered its forecast for supply increases this year. The
agency also said there are "signs are mounting that the tide will
turn," for oil prices in its closely watched monthly market
report.
Analysts, however, said the short-term outlook remains
bearish.
"While the news was able to halt oil's price decline, it was not
enough to turn prices bullish," Morgan Stanley said. "By 2Q15,
physical market challenges may overwhelm any near-term change in
sentiment. Momentum on supply growth, falling seasonal crude demand
and storage economics all pose significant problems in 2Q despite
sizable short positions."
Investors this week will look to Frankfurt where the European
Central Bank is expected to launch its quantitative easing program.
Analysts expect a weaker euro to weigh on dollar-denominated
commodities like oil.
Meanwhile, J.P. Morgan was the latest bank to slash its forecast
for oil prices in 2015, saying it expects to see a U-shaped
recovery in oil prices to $90 a barrel in 2019.
"We see significant oil oversupply with risk that Brent falls
below $40 a barrel in the near term should the oil market not be
able to accommodate a 1.6 million-barrel-a-day surplus," it said,
adding that oil prices could trough in March at an average of $38 a
barrel.
J.P. Morgan cut its 2015 average Brent crude price forecast to
$49 a barrel from $82 a barrel, and its 2016 average forecast to
$56.8 a barrel from $87.75 a barrel.
Nymex reformulated gasoline blendstock for February--the
benchmark gasoline contract--fell 0.3% to $1.3549 a gallon, while
ICE gas oil for February changed hands at $476.75 a metric ton, up
$4.75 from Friday's settlement.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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