Friday, August 28, 2015

Oil Prices Down to $45 a Barrel Amid Glut

HOUSTON — Oil prices jumped for a second day on Friday, sending the United States benchmark past $45 a barrel, a gain of 17 percent in only two days.

But most energy experts discounted the surge as a temporary trading event, with speculators scurrying to eliminate their short trading positions, and said oil was likely to fall below $40 again.

“There is no substantial change in either the demand or supply side,” said Tobias Read, chief executive of Swift Worldwide Resources, a Houston-based global oil and gas staffing firm.

One event moving the oil markets on Friday was a report of a Saudi ground offensive in northern Yemen, which raised concern that renewed Middle East turbulence might disrupt energy supplies.

But the oil market has roughly followed the mood on Wall Street in recent weeks, which has been shaken by fears about China’s economic outlook.

The two-day rebound in prices, which had dipped as low as $37 a barrel in recent days and which remain more than 50 percent below last summer’s levels, suggested to some analysts that the market might have established or approached a low.

In an investor note on Friday, Morgan Stanley identified several possible catalysts for an oil price recovery, including a potentially large Chinese fiscal stimulus package to foster greater economic growth, more resilient United States economic growth, a future decline in American oil production, and a congressional vote against the Iran nuclear deal, which it said “could undermine confidence in the deal’s success.”

One reason for the recent price decline is the prospect that Iran could provide as much as a million more barrels a day to the 94-million-barrel global market in a year or so if sanctions are lifted. The market today is as much as two million barrels a day oversupplied.

But most oil company executives remain skeptical that oil prices will again approach the $100-a-barrel level anytime soon. They note that China faces continuing economic turmoil that could deplete demand for energy throughout the developing world economies that have been supplying it with raw materials and buying its manufactured goods.

They also note that Saudi Arabia and Iraq show no sign of slowing their record-breaking production, while American production has been surprisingly resilient in the face of slumping prices. Oil inventories remain at record levels for this time of the year in the United States.

“Markets and analysts are increasingly pessimistic about demand growth and supply declines materializing,” said Badr Jafar, president of Crescent Petroleum, an oil company based in the United Arab Emirates. “The global supply surplus remains in place, with inventories continuing to build worldwide.”

Motorists continue to benefit from the low prices as the summer driving season enters its final weeks. The average national price for a gallon of regular gasoline on Friday was $2.51, according to the AAA motor club, down 12 cents from a week ago and down 92 cents from a year ago.

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