By Georgi Kantchev
LONDON--Oil prices rose on Friday, after a volatile week that
saw the commodity whipsaw between gains and losses.
Crude is still on track to record its fourth consecutive weekly
drop, exacerbating a rout in prices that started in the summer. Oil
prices have nearly halved since their peak in June, their sharpest
fall since the 2008 financial crisis, as fears of oversupply
coupled with tepid demand engulfed the market.
Brent, the global average, was up 1.5% in early London trade,
flirting with the key $60 mark. On the New York Mercantile
Exchange, U.S. light, sweet crude was up nearly a dollar, trading
at around $55.
"In the next six to nine months the market will be in test mode
as it remains uncertain what the correct oil price is," said
Torbjørn Kjus, oil analyst at DNB Markets. "There is potential for
short covering rallies but volatility is set to remain high."
On Thursday, crude had rallied by as much as 3% in early trade
only to see the gains pared as negative sentiment overwhelmed the
market. According to Mr. Kjus, "the market is very much sentiment
driven and people seem to be interpreting news bearishly right
now."
Bearish news came as key oil ministers from the Organization of
the Petroleum Exporting Countries on Thursday underpinned the
perception that they are willing to tolerate lower prices to
protect their market share.
"The share of OPEC, as well as Saudi Arabia, in the global
market has not changed for several years...while the production of
other non-OPEC [countries] is rising constantly," Saudi Arabia's
Oil Minister Ali al-Naimi said. "In a situation like this, it is
difficult, if not impossible, for the kingdom or OPEC, to take any
action that may result in lower market share and higher quotas from
others, at a time when it is difficult to control prices."
Mr. al-Naimi's comments were later echoed by the energy minister
of the United Arab Emirates, Mohamed Faraj Al-Mazrouei, who said
that non-OPEC producers "should contribute to fix the imbalance in
the market."
"The real cause of the price slump is probably to be found above
all in the shift in OPEC strategy which, rather than attempting to
keep the market balanced as it did in the past, is now aimed at
defending its market shares," Commerzbank said in a note on
Friday.
Looking to 2015, however, crude prices could be in for a
rebound, especially in the second half of the year, analysts
say.
"The decline has gone too far to be sustainable," said Mr. Kjus,
who sees the average oil price next year at $70 per barrel.
According to him, the rout in prices will lead to lower capital
expenditure by oil firms which, in turn, will limit the supply
growth. That is especially valid for U.S. shale industry which has
experienced a boom in recent years and is largely responsible for
the current oil glut.
"Banks are already reluctant to push more money into shale and
the bond markets are effectively closed for these players," Mr.
Kjus said. "When we end 2015, U.S. oil production probably won't be
higher than now and that will help balance the market."
Nymex reformulated gasoline blendstock for January--the
benchmark gasoline contract--rose 1.8% to $1.55 a gallon, while ICE
gasoil for January changed hands at $549.25 a metric ton, up $4.00
from Thursday's settlement.
Summer Said and Eric Yep contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
Access Investor Kit for DNB ASA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=NO0010031479
Subscribe to WSJ: http://online.wsj.com?mod=djnwires