OIL MAY HAVE BOTTOMED OUT
Global oversupply has begin falling
PARIS The organization that represents major oil-consuming nations said Friday that sign sofa market that has “bottomed out” are emerging.
U.S. crude prices jumped to a high for the year. Brent crude, used as a global benchmark, hit a high for the year Tuesday and rose one per cent Friday. Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged to around US$ 30 per barrel, from well over US$ 100 per barrel just two years ago.
A broad retreat by the energy sector played out again Friday on both fronts.
The number of oil and natural gas rigs active in the U.S. fell for the 12th consecutive week, according to Baker Hughes on Friday, to 480. That’s the lowest level in decades, and perhaps the fewest since the earliest days of the oildrilling industry.
And Texas driller Anadarko Petroleum Corp. said that it would cut 1,000 workers, 17 per cent of its workforce. The pain at Anadarko and other energy companies may finally be translating into a reduction of a massive and global oversupply of oil, the International Energy Agency said Friday.
OPEC production tumbled by 90,000 barrels a day last month, the IEA said. U. S. production that had surged due to new drilling technology is expected to fall by almost 530,000 barrels a day this year, according to the IEA.
The Paris organization, however, said that the recovery in crude prices in recent days from multiyear lows does not mean that there will be a significant and sustained rebound in the short- term. There have been sharp declines in demand, particularly in the United States and China, it said.
China, the world’s second- largest oil consumer, is attempting to quell anxiety over a slowing economy and labour unrest.
Goldman Sachs said on Friday that production is unlikely to increase in the U. S. until 2017, and that prices could remain volatile in the next few months. Analysts with Goldman said that if U. S. drillers ramp up production with any rise in oil prices, “we believe a self- defeating rally in oil prices/ equities could result.”
The report buoyed stocks of energy companies Friday, making the sector the second- best performer on the Standard & Poor’s 500 index.