Oil Sees Slight Recovery as Markets Catch Breath

LONDON--Crude oil futures regained some lost ground but stayed near five-year lows Thursday, after crashing by close to 5% on Wednesday.

The commodity, which has tumbled by 40% since the summer on fears of oversupply, is unlikely to make a sustained comeback soon, market participants say.

"The market is taking a little bit of breath today and history tells us that Thursday is usually an up day," said a London-based energy broker. "But there is still a lot of pressure out there and the market hasn't found its floor yet."

Adding to the pressure were comments by Saudi Arabia's oil minister Ali al-Naimi on the sidelines of a conference in Lima late Wednesday. Asked whether the Organization of the Petroleum Exporting Countries would need to cut oil production before the oil cartel's next meeting in June, Mr. al-Naimi was quoted as saying: "Why should we cut production? Why?"

His comments fueled speculation that Saudi Arabia, long the world's most influential oil price broker, was prepared to tolerate lower prices and let market forces settle the current global oil glut. "The minister's comments on Wednesday definitely added to the trouble," the energy broker said.

At its meeting in November, OPEC decided not to intervene to prop up oil prices. The move was primarily seen as a way for the organization to protect its market share. Prices have fallen by more than 10% since then and analysts don't anticipate a recovery in the foreseeable future.

"For this, the economic conditions for the oil markets have to change, which is an unlikely possibility given OPEC's decision not to cut production a fortnight ago," Jameel Ahmad, chief market analyst at FXTM, wrote in a note to clients.

On Wednesday, OPEC said demand for its oil is expected to fall below its current production quota of 30 million barrels a day. According to the organization's latest forecasts, demand for its crude will decline to 28.9 million barrels a day in 2015, down from 29.4 million barrels a day in 2014.

"With OPEC not taking any action, we are probably going to fall to 50 dollars a barrel," Mr. Ahmad said. "That is a probable support level, one that people would be comfortable with."

On Thursday morning in London, Brent crude for January delivery was up 59 cents at $64.83 a barrel on ICE Futures Europe. In electronic trading on Nymex, WTI changed hands at $61.40, up 46 cents from Wednesday when it touched levels not seen since the global recession in 2009.

NYMEX reformulated gasoline blendstock for January, the benchmark gasoline contract was little changed at $1.6520 a gallon. Front-month ICE gas oil was up $3 from Wednesday's settlement, trading at $587.00 a metric ton.

Write to Georgi Kantchev at [e-mail]

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