Oil Rises as OPEC Forecasts Increased Demand
BY DJ Business News
Energy
8:05 AM ET 02/09/2015
Oil prices rose in Europe on Monday in response to the Organization of the Petroleum Exporting Countries increasing its demand growth forecast for 2015 by 110,000 barrels a day and reducing non-OPEC supply growth by 420,000 barrels a day.
The move to reduce non-OPEC supply was seen as a response to falling rig counts, which have declined faster than the market expected.
"This is what we expected in the sense that they were very high to begin with. At current prices, such a huge part of non-OPEC supply is uneconomic that you would expect this kind of revision to take place," said Amrita Sen, chief oil analyst at Energy Aspects.
At noon, Brent crude for March delivery rose 0.6% to $58.16 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, U.S. crude futures for delivery in March recently traded at around $52.51 a barrel, up %1.6 from Friday's settlement.
Earlier in the session, they had been lower for the second session in a row as some market participants start to believe the market has started to bottom out after an eight-month slump.
Oil prices are more than 50% lower than they were in June last year, but slowly some of the supply and demand factors appear to be leveling out, say analysts.
There is "credible fundamental support for the view that oil found a bottom at around $45/bbl. on Brent and is now trying to find a new equilibrium," said analysts at research firm PVM.
A number of investors are buying up oil to store it on land and sea, cashing in on the fact that oil prices are likely to be considerably higher in the future. According to PVM, this provides an additional layer of demand, which helps keep prices higher.
On the supply side, a number of major exploration projects have been postponed. While that won't have much effect for several years, it adds to positive sentiment.
Additionally, the number of U.S. oil rigs in operation declined again last week, by 83, which takes the total decline since the start of the year to 342. At 1,140, the number of rigs that are currently working is at its lowest level since December 2011, and down 29% since a record high as recently as October 2014.
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