IEA: “There are signs that prices have bottomed out” in global oil market

IEA warns recent recovery does not signal significant, sustained rebound

The IEA says in February, supplies dropped by 180,000 barrels per day, but it also noted a sharp slowdown in demand growth.  Chevron photo.

PARIS _ The organization that represents major oil-consuming nations said Friday that signs of a market that has “bottomed out” are emerging.

U.S. crude prices jumped to a high for the year. Brent crude, used as a global benchmark, hit a high for the year Tuesday and rose 1 per cent Friday.

Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged to around $30 per barrel, from well over $100 per barrel just two years ago.

A broad retreat by the energy sector played out again Friday on both fronts.

The number of oil and natural gas rigs active in the U.S. fell for the 12th consecutive week, according to Baker Hughes on Friday, to 480. That’s the lowest level in decades, and perhaps the fewest since the earliest days of the oil drilling industry.

And Texas driller Anadarko Petroleum Corp. said that it would cut 1,000 workers, 17 per cent of its work force.

The pain at Anadarko and other energy companies may finally be translating into a reduction of a massive and global oversupply of oil, the International Energy Agency said Friday.

OPEC production tumbled by 90,000 barrels a day last month, the IEA said. U.S. production that had surged due to new drilling technology, is expected to fall by almost 530,000 barrels a day this year, according to the IEA.

The Paris organization, however, said that the recovery in crude prices in recent days from multi-year lows does not mean that there will be a significant and sustained rebound in the short-term. There have been sharp declines in demand, particularly in the United States and China, it said.

China, the world’s second-largest oil consumer, is attempting to quell anxiety over a slowing economy and labour unrest. Earlier this month, it cut its growth expectations for the year.

Goldman Sachs said on Friday that production is unlikely to increase in the U.S. until 2017, and that prices could volatile in the next few months.

Analysts with Goldman said that if U.S. drillers ramp up production with any rise in oil prices, “we believe a self-defeating rally in oil prices/equities could result.”

The report buoyed stocks of energy companies Friday, making the sector the second-best performer on the Standard & Poor’s 500 index.

The Canadian Press