Oil advanced, capping the first weekly gain since November, after the International Energy Agency lowered forecasts for supplies from outside OPEC and an industry report showed US companies reduced drilling activity.
Crude rose 5.3% in New York. Non-OPEC oil producers will boost output this year at a slower rate than previously forecast, aiding a recovery in crude prices, the IEA said in its monthly market report.
Rigs targeting oil in the US fell for the eighth time in nine weeks, by 55 to 1,366 this week, Baker Hughes Inc. said. They are at the lowest level since October 2013.
“It definitely looks like the market’s trying to form a near-term low,” Kyle Cooper, director of commodities research at IAF Advisors in Houston, said.
“It’s about time we did take a breather since we’ve already dropped $60.”
WTI for February delivery increased $2.44 to settle at $48.69 a barrel on the New York Mercantile Exchange. The contract dropped to $44.20 on January 13, the lowest level since April 2009. The contract rose 0.7% this week.
The volume of all futures traded was 22 percent above the 100-day average at 3:02 p.m.
Brent for March settlement rose $1.90, or 3.9%, to end the session at $50.17 a barrel on the London-based ICE Futures Europe exchange.
Volume for all futures traded was 4% higher than the 100-day average. The February contract expired yesterday after decreasing $1.02 to $47.67. The European benchmark crude settled at a $1.04 premium to the March WTI contract.
Oil fell almost 50% last year, the most since the 2008 financial crisis, as supplies swelled amid the fastest pace of US production in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to cut output.
Goldman Sachs Group Inc. and Societe Generale SA were among banks to reduce their price forecasts this week.
“I still think that there’s at least a fifty-fifty chance $44.20 will be breached,” Cooper said.
WTI tumbled 69% from $31.82 a barrel in November 1985 to $9.75 in April 1986 when Saudi Arabia, tiring of cutting output to support prices, flooded the market.
Prices didn’t claw back the losses until 1990.
“The best historical analogy for what’s happening is 1986,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion, said.
“It will be extraordinarily painful for non-OPEC producers to lead the way to a rebalanced market.”
The IEA, a Paris-based adviser to industrialized nations, lowered its non-OPEC supply growth estimate by 350,000 barrels a day, the first cut since the 2015 forecast was introduced in July.
Half the reduction is from Colombian output while effects on U.S. production are so far “marginal,” it said.
The slowdown in output growth will lead to a “rebalancing” of currently oversupplied global markets in the second half, reviving prices, the agency said.
“The IEA report is the first serious evidence that low oil prices are rebalancing the market,” Michael Lynch, president of Strategic
Energy & Economic Research in Winchester, Massachusetts, said by phone.
“The price has probably gone down enough. We’ve rebounded a few times as prices have dropped and it will be interesting to see how things work out this time.”
Lower prices won’t bolster demand because of underlying weakness in the global economy, said the agency, which kept its global oil consumption forecast for 2015 unchanged.
US crude supplies rose 5.39 million barrels to 387.8 million last week, the highest since June, according to an Energy Information Administration report on January 14.
Production climbed 60,000 barrels a day to 9.19 million in the seven days ended Jan. 9, the highest in weekly estimates that started in January 1983, according to EIA data.
“There was a little supportive news today with the IEA reducing the non-OPEC production forecast,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said.
“This still looks like a very challenging market. We’re going to see 1.5 million barrels a day of excess production through the first half of the year and possibly more.”
WTI may extend losses next week, according to 21 of 40 analysts and traders in a Bloomberg News survey. Eleven said futures will advance and eight projected little change.
Gasoline futures for February delivery climbed 5.94 cents, or 4.6%, to $1.3588 a gallon in New York. February ultra-low sulfur diesel rose 4.23 cents, or 2.6%, to $1.6656.
Retail gasoline, averaged nationwide, slid 0.3 cent to $2.082 a gallon yesterday, the lowest since May 2009, according to Heathrow, Florida-based AAA, the largest US motoring group.
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