Every day this week arrived with more evidence that energy usage is unlikely to bounce back soon, yet some experts believe oil prices may already have struck bottom.
The US unemployment rate jumped to its highest level in 26 years. Home sales sunk to a new low. American International Group Inc and General Motors Inc continued to burn through cash despite receiving billions in federal loans.
Still brokers and traders seemed to ignore the daily doses of bad financial news. Benchmark crude closed above US$40 every day of the week for the first time in a month
Light, sweet crude for April delivery on Friday rose US$1.91 to settle at US$45.52 on the New York Mercantile Exchange. It was the second time crude settled above US$45 in one week, which hasn’t happened since the first week of the year.
In London, Brent prices rose US$1.21 to settle at US$44.85 on the ICE Futures exchange.
Analysts say traders have mostly factored the doom and gloom into crude prices already, and focused instead on another key statistic this week: US crude inventories dropped unexpectedly after swelling for months with cheap oil.
Deutsche Bank said on Friday that oil demand in coming months would be even lower than the most pessimistic estimates, but that OPEC cuts have finally begun to take hold.
The US federal government said crude stocks fell by 700,000 barrels for the week ended Feb. 27, and analysts believe that OPEC will call for more production cuts at its meeting next Sunday.
“OPEC seems to have its act together,” said Michael Lynch, president of Strategic Energy and Economic Research. “They’re bringing inventories down, and that’s putting a floor on the market.”
Traders previously shrugged off OPEC supply cuts as the global recession and plummeting demand forced oil prices down from a high of more than US$147 a barrel in July. But world supplies are again coming into focus months after OPEC began to turn off the spigots.
Analyst Addison Armstrong said on Friday that OPEC shipments are at a five-year low. The group is to slash its crude exports by 430,000 barrels per day in the four weeks to March 21, he said, citing tanker-tracking company Oil Movements.
Oil prices may have hit bottom after a tumultuous 2008 in which crude swung to a historic high and then fell to five-year lows, trader and analyst Stephen Schork said.
“There’s very little reason to buy oil,” he said. “We know how dire the economy is. But we can’t seem to get the prices lower.”
Oil prices appear to have leveled off and are likely to remain between US$35 and US$45 per barrel over the next few months, Schork said.
Oil prices also were given a boost late in the week as a jump in US unemployment weakened the US dollar and gave foreign investors more buying power. Oil, which is traded in dollars, naturally shifts higher when the dollar drops.
The US Labor Department said America’s unemployment rate widened to 8.1 percent last month, the highest since late 1983. The US shed 651,000 jobs last month.
“The dollar got shaken a little bit by that stunningly bad report,” said Phil Flynn, analyst at Alaron Trading Corp. “It caused people who were running to the dollar as a safe haven to take pause. They’re running to gold or silver today. And some of that money went back to the euro.”
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