Crude oil prices rose slightly on Thursday – a move that many analysts say is a brief respite in a market that remains volatile.
The commodity's price has declined by more than half since June 2014 due in large part to surging U.S. output and the Organization of Petroleum Exporting Countries' decision to maintain its high output ceiling, Bloomberg reported.
Thursday's trading session shows little price movement
According to Bloomberg, west Texas Intermediate for February delivery rose $.18 to $48.83 a barrel on the New York Mercantile Exchange. On Wednesday, futures briefly fell to $46.83, which was the lowest level the commodity had seen since April 2009.
Additionally, Brent for February settlement fell $.02 to $51.13 a barrel on the London-based ICE Futures Europe exchange. It reached $49.66 yesterday, the least since April 29, 2009. The European benchmark oil traded at a $2.32 premium to WTI.
Booming OPEC/U.S. production continues
Saudi Arabia, in particular, has remained steadfast in its commitment to its current output levels, though the Saudi oil minister, Ali Al-Naimi, said that other OPEC countries are welcome to curb their production if they feel it is necessary.
"The Saudis are providing no support for the market," Helima Croft, chief commodities strategist at RBC Capital in New York, said by phone in an interview with Bloomberg. "It looks like they will let prices continue to fall, taking as much non-OPEC production offline."
In the U.S., crude output grew to 9.14 million barrels per day through Dec. 12. This is the highest pace of production captured in the weekly data from the Energy Information Administration reports, dating back to when they started in January 1983.
"This is something we never expected to see," Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, said yesterday by telephone in a separate interview with Bloomberg. "You look back at 2008, 2009, domestic production was half what it is now. We're not just passing a benchmark in exports, this is going to be a trend going forward."
"Fundamentals and investor sentiment in the oil markets mostly remain weak."
Analysts say crude oil prices could continue their plunge
This somewhat limited price movement for crude oil seems to be just a temporary blip in a market that analysts and investors say could fall even further throughout 2015. According to a report from MarketWatch, fundamentals and investor sentiment in the oil markets mostly remain weak. Bloomberg added that because crude's decline happened so quickly and was so driven by investor sentiment, that a forecast from Bank of America Corp. to UBS AG says there is no way to tell when the commodity will finally halt it's precipitous fall.
A report from Société Générale's head of oil research Michael Wittner explained that oil markets may be pricing in a massive growth in global oil stockpiles for the first half of 2015. This could force prices down to levels below operating costs in expensive oil-producing regions which could lead to the closing of some production plants.
While a few analysts are pointing out that crude prices have seen dramatic falls in the past from which they recovered, the fundamentals driving the price movements this time could be different.
"The market is facing many more challenges than in 2008 and 2009 when we were last at these levels," Walter Zimmerman, chief technical strategist for United-ICAP in Jersey City, New Jersey, said to Bloomberg. "There was no million barrels a day of surplus output."
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