Oil prices rebounded by more than US$1 a barrel on Friday, but analysts are hesitant to call a turnaround in a market that is down more than 13 percent this year on dampened heating fuel demand.
Light, sweet crude rose US$1.11 to settle at US$52.99 on the New York Stock Exchange, after plummeting to a new 19-month trading low of US$51.56 earlier in the day. It is down nearly 6 percent on the week and 13.2 percent since closing last year at US$61.05 a barrel.
Brent crude on London's ICE Futures exchange rose US$1.25 to settle at US$52.95 a barrel.
Many traders decided to buy into the oil market on Friday, in a typical end-of-the-week short-covering move -- in other words, traders who had bet on an even sharper decline this week bought back their positions.
Some analysts are predicting prices may extend their drop to US$40 a barrel, a price not seen since 2004. The energy market has had a hard time maintaining rebounds lately, despite several factors that have given prices a boost in the past: The possibility of another OPEC cut, tensions in the Middle East are high, global energy demand is growing, and violence in Nigeria has escalated.
Attempts to rally this year have been rebuffed by persistent mild weather in parts of the US, Europe and Asia that consume heating oil; a number of investment funds taking short positions, or bets that prices will fall; and skepticism that OPEC is carrying out the production cuts it has promised.
Reports have circulated that OPEC is planning to make further cuts. Dow Jones Newswires cited on Friday a senior delegate of the cartel saying that OPEC is discussing whether to hold an emergency meeting Jan. 20-21 and make an additional 500,000 barrel-a-day cut to the previously announced 500,000 barrel-a-day cut set to begin Feb. 1.
The OPEC's credibility, though, has dwindled in the eyes of many traders. On Thursday, Dow Jones Newswires reported that tanker tracker Oil Movements said crude exports from OPEC countries are expected to rise 350,000 barrels a day to 24.5 million barrels a day in the four weeks ending Jan. 27, despite OPEC's announcements to reduce production by 1.2 million barrels of oil a day starting last November.
"The cohesiveness that OPEC used to enjoy is somewhat unwinding," said James Cordier, president of Liberty Trading Group in Tampa, Florida, adding that based on various reports it appears that while some nations such as Saudi Arabia are complying with cuts, others including Venezuela haven't been so diligent.
"Let's face it -- some OPEC producers produce oil for US$10 a barrel. So it's not like they're giving it away if it's at US$52," Cordier said, noting that he estimates OPEC has only delivered on about half of its promised reductions.
Because the cuts began in November, they have only just begun to hit the market.
"If OPEC can improve compliance, then prices will be pushed higher in February. If OPEC fails in balancing the market, and gets little help from the weather, then the price fall could continue over the entire quarter," wrote Global Insight oil analyst Simon Wardell in a research note.
At this point, though, demand seems to be the big market driver, Cordier said, noting that the world's had ample supply for years. "That OPEC is talking about cutting 500,000 barrels here, a million barrels there, it really doesn't matter," he said.
The historically warm winter has caused a glut in US petroleum products. On Wednesday, government data showed big increases in domestic gasoline and heating oil inventories. The National Oceanic and Atmospheric Administration said Thursday that some below-normal temperatures are expected to hit soon in the Northern US, but it expects warmer-than-normal weather overall in the region through March.
Crude oil had been in an eight-year bull market until last summer's high above US$78 a barrel. In 1998, oil traded as low as US$10.35.
In NYMEX trading on Friday, heating oil gained US$0.0232 to settle at US$1.5036 a gallon (US$0.3972 per liter); gasoline rose US$0.0415 to settle at US$1.4320; and natural gas rose US$0.309 to settle at US$6.601 per 1,000 cubic feet (US$0.2331 per cubic meter).
UNCERTAINTY: Innolux activated a stringent supply chain management mechanism, as it did during the COVID-19 pandemic, to ensure optimal inventory levels for customers Flat-panel display makers AUO Corp (友達) and Innolux Corp (群創) yesterday said that about 12 to 20 percent of their display business is at risk of potential US tariffs and that they would relocate production or shipment destinations to mitigate the levies’ effects. US tariffs would have a direct impact of US$200 million on AUO’s revenue, company chairman Paul Peng (彭雙浪) told reporters on the sidelines of the Touch Taiwan trade show in Taipei yesterday. That would make up about 12 percent of the company’s overall revenue. To cope with the tariff uncertainty, AUO plans to allocate its production to manufacturing facilities in
Taiwan will prioritize the development of silicon photonics by taking advantage of its strength in the semiconductor industry to build another shield to protect the local economy, National Development Council (NDC) Minister Paul Liu (劉鏡清) said yesterday. Speaking at a meeting of the legislature’s Economics Committee, Liu said Taiwan already has the artificial intelligence (AI) industry as a shield, after the semiconductor industry, to safeguard the country, and is looking at new unique fields to build more economic shields. While Taiwan will further strengthen its existing shields, over the longer term, the country is determined to focus on such potential segments as
Chizuko Kimura has become the first female sushi chef in the world to win a Michelin star, fulfilling a promise she made to her dying husband to continue his legacy. The 54-year-old Japanese chef regained the Michelin star her late husband, Shunei Kimura, won three years ago for their Sushi Shunei restaurant in Paris. For Shunei Kimura, the star was a dream come true. However, the joy was short-lived. He died from cancer just three months later in June 2022. He was 65. The following year, the restaurant in the heart of Montmartre lost its star rating. Chizuko Kimura insisted that the new star is still down
While China’s leaders use their economic and political might to fight US President Donald Trump’s trade war “to the end,” its army of social media soldiers are embarking on a more humorous campaign online. Trump’s tariff blitz has seen Washington and Beijing impose eye-watering duties on imports from the other, fanning a standoff between the economic superpowers that has sparked global recession fears and sent markets into a tailspin. Trump says his policy is a response to years of being “ripped off” by other countries and aims to bring manufacturing to the US, forcing companies to employ US workers. However, China’s online warriors
RSS