Oil Recovers to $46 on OPEC, Optimism

Friday, oil prices rose more than 6% on the New York Mercantile, trading above $46 per barrel, as investors and energy insiders saw hope today that the spiraling price of crude would soon start working its way up again.

Analysts point to the realization of OPEC's drastic cuts in production, announced at the December 2008 meeting. In an effort to buoy prices, the 12 member countries agreed to reduce production by 2.2 million, starting in January 2009. According to a report from the state-run newspaper, Saudi Arabia has already resigned to cut its production by 300,000 bopd.

"With the recent gains in price and the flattening out of the forward curve, we may be seeing the first evidence that the OPEC production cuts are having an impact on the crude oil market," Citi Futures Prospective energy analyst Tim Evans told Bloomberg. "If so, this could be the start of an ongoing price recovery."

Despite the recent EIA report that US crude stocks were at the highest they've been since August 2007, the price of later-dated futures contracts stayed higher than the current contract, with investors buying barrels now to sell them in the future at a greater price, illustrating growing confidence in the oil market.

"When the market shrugs off inventory data like that, it often can be a beginning of a signal that things have turned," said Gene McGillian, analyst at TFS Energy, to the Wall Street Journal. "We need to see more of a confirmation that the market can withstand the negative signals that we saw today before we're really convinced."



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KC | Feb. 2, 2009
Oil storage at Cushing, OK, and across the US are full. Investors are storing oil and contracting sales for May futures, which are higher currently. If we get to May and the price isn't at or above the contracted price, said investors will take a hit, and prices could go lower.

Jon Roestenburg | Feb. 1, 2009
The Price of crude and the buoyant inventories are transient. Oil is finite and the cost of production have been tracking the sale price. Expensive wells and fields will have a respite, however the world consumption is still around 80MBOPD. The reserve replacement is NOT keeping up with consumption so prices will start to reflect this reality. The lack of financial confidence is all that has changed from last year. Bringing on new fields and restarting shut-in fields takes time and money which inevitably means that the sale price will be much higher - so oil producers have a real chance now to get new production to boost their future inventories.

Steven | Jan. 31, 2009
I have seen it here in So. California. They are shutting in wells. I am a Consultant with a major oil company here, and they have spent millions of dollars on one project, and now without making any production they are shutting it all down. Also this is very light oil.

Ryan Hogan | Jan. 30, 2009
What better time to invest in exploration and adding to your reserves. Costs are coming down and quality is coming up. Everyone knows the price of oil will recover. Why not beat your competitors investment costs in your reserves?

Agarwal Mukesh | Jan. 27, 2009
Oil prices will certainly head upwards in long term. Present low prices are unsustainable.

Vincent Roxton | Jan. 26, 2009
Down here in So. California, production guys are really having it tough, as leases want to save money by not working over wells right now and leaving other wells down ... hopefully the price spikes back up to where it boomed a few years back and puts us all at ease.

Larry | Jan. 26, 2009
As long as I have a job; it really doesn't matter. They are going to do whatever they want anyway. They need to concentrate on helping the workers instead of lining their pockets!

Alfred Tompkins | Jan. 26, 2009
We should continue drilling no matter what the price of oil. Just because the price is low doesn't mean we don't need to drill. What ever happened to using our oil & gas and quiting using foreign oil?

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