Asian trading opened to higher crude oil prices, as US data indicated a possible boost in consumer spending.
Market bottoming out?
With crude futures inching up as trading opened in Asia, on the back of a 15 percent gain just last week, some analysts are surmising that the market may well have bottomed out. While International Brent futures rose 5 cents from the previous close to hit USD 35.15 per barrel, April Brent crude went up to USD 35.55, an increase of 45 cents per barrel on the London ICE Futures exchange. Meanwhile, US West Texas Intermediate crude futures rose to USD 32.88 per barrel early Monday morning, an increase of 10 cents from last close.
US data gives cause for optimism
The US economy showed signs of an upticks with some key indicators clocking in at healthier levels. Consumer spending in the United States grew at its fastest rate in over eight months in January. A strengthening job market with better wages has helped bring the American consumer back to stores. Retail sales as well as the real estate market both showed signs of improvement with stronger numbers. Even the troubled manufacturing sector seemed set for a change of fortune, as fresh orders for higher ticket durables grew.
According to analysts and industry experts, all these are positive signs for the future of oil. This upswing in sentiment among US consumers is likely to drive higher demand for oil.
Since the middle of 2014, oil prices have plummeted by as much as 70 percent, on the back of excess supply and barely there growth of demand. Now, this price pressure has meant that centers where oil production costs are higher, like the United States, are cutting back production with a view to lowering their costs.
According to data from the US Energy Information Administration, US crude production dropped to 9.1 million barrels a day as of the week closing on Feb 19. It is a continued downtrend that has seen the oil rig count go down by 68 percent since mid-2014. As of last week the oil rigs in the country stood at 413, after a further reduction of 26 rigs.
While major players in traditional oil production regions of the world have shown no signs of playing ball on prices, there is some hope in the form of a potential freeze in production levels to be held at January levels being discussed between Saudi Arabia as well as Russia.