NEW YORK (Reuters) - Global oil prices snapped a two-day decline and rose around 2 percent on Wednesday on hopes prices will recover as energy companies cut production investment to alleviate a glut that has wiped out more than half crude’s value since June.
The lift in prices come after OPEC’s Secretary General and the International Energy Agency’s chief economist both said they expected prices - hovering at April 2009 lows - to rebound later this year.
Total SA (TOTF.PA) joined a raft of international oil companies, including BP Plc (BP.L) and ConocoPhillips (COP.N), in slashing budgets in light of the recent plunge in prices. The French oil major said it would cut spending on U.S. shale production, among other regions, raising hopes there would be a reduction in the oversupply of oil from the United States.
The cut is “headline-grabbing,” analyst Matt Smith of Schneider Electric said, but it will be months before an actual reduction will manifest itself.
“Until that point, we’re going to continue to be weighing OPEC’s ongoing production versus these potential cuts in the U.S.,” he said.
Brent LCOc1 rose $1.04 to settle at $49.03 a barrel, while U.S. crude CLc1 was up $1.31 and settled at $47.78 a barrel.
The dollar index .DXY was fairly flat, trading just under 93 as traders waited for the European Central Bank to announce a bond-buying program to support the European economy.
On the technical side, U.S. crude has yet to break through key resistance levels, indicating there is no clear pattern for a major upswing or downswing in coming days.
“We’ve been trading in a consolidation range in the last few days. At this point in time, it looks like WTI and Brent are starting to carve out some sort of low,” said Brian LaRose, a technical analyst with United-ICAP.
Turmoil in Yemen further bolstered expectations there would be a long-term recovery, analysts said. Yemen’s president was expected to yield to demands from Houthi rebels after two days of battle with presidential guards, a move Arab neighbors called a coup.
On the demand side, U.S. appetite for crude, typically strong in spring, might be higher than usual because fewer refineries are shutting for maintenance this year, IIR Energy said.
Industry group American Petroleum Institute (API) late on Wednesday reported that U.S. crude stocks rose 5.7 million barrels in the week to Jan. 16. Stocks at Cushing rose by 2.5 barrels. [API/S]
Meanwhile, gasoline stockpiles rose, while distillate fuel stockpiles fell, API said.
The more closely watched U.S. government inventory report follows on Thursday. [EIA/S]
Additional reporting by Himanshu Ojha in London and Alex Lawler and Henning Gloystein in Singapore; Editing by Marguerita Choy and Andre Grenon