Rally Continues as Oil Rises 29 Cents a Barrel
Oil prices advanced impressively Friday, maintaining the previous day’s momentum started by reports that OPEC may reduce output to halt the prolonged price slide and that its pricing committee may meet in an emergency session.
Contracts for April delivery of West Texas Intermediate, the benchmark U.S. crude, closed 29 cents higher at $16.29 per 42-gallon barrel on the New York Mercantile Exchange, adding to Thursday’s strong 51-cent gain.
However, analysts disagreed as to whether fundamental or technical factors were responsible for the two-day breakout above the $15 range.
Growing Confidence
Some said traders were anticipating new moves by oil producing countries to trim their excessive output, bringing world supply and demand closer into balance. Others, noting that continuous profit-taking had dampened the rally Friday, suggested that it lacked strong conviction.
On the U.S. Gulf Coast, West Texas Intermediate added 20 cents to $16.20 a barrel.
Refined products also built on Thursday’s robust advance. Wholesale heating oil settled at 44.69 cents a gallon, up 0.76 cent after Thursday’s 0.90 cent gain. Wholesale unleaded gasoline closed at 45.59 cents a gallon, up 0.45 cent after leaping 1.14 cents Thursday.
“There’s a growing confidence that, by whatever means it might take, our oil-exporting friends will contain the discounting and get prices moving up,” said Bob Baker, an analyst for Prudential-Bache Securities.
Since late last year, sluggish demand and growing surpluses have put downward pressure on oil prices. That weakness was aggravated by discounting on the part of members of the Organization of Petroleum Exporting Countries.
Analysts said the 13-nation cartel has been sticking to its aggregate quota of 17.5 million barrels a day, but that the total goal, set in December, was simply too high for the world’s needs.
As a result, by early this week prices had eroded to levels between $13 and $14 per barrel in the Persian Gulf--far short of OPEC’s $18 target--and to $15.37 per barrel on the New York Merc, $2 to $3 cheaper than January levels.
