BANGKOK, Thailand (AP) — Oil prices rose above $47 a barrel Tuesday in Asia as traders weighed waning demand and OPEC’s compliance with production cuts.
Light, sweet crude for March delivery was up $1.34 at $47.07 a barrel in electronic trading on the New York Merchantile Exchange by midafternoon in Bangkok. The contract fell 74 cents overnight to settle at $45.73.
“Traders are hoarding oil now in the hope of a recovery in the price in perhaps one month’s time if OPEC has complied with production cuts,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne.
The Organization of Petroleum Exporting Countries has announced 4.2 million barrels a day in production cuts since September in an attempt to stabilize oil prices, which have fallen almost 70 percent since peaking at nearly $150 a barrel in July.
There has been skepticism OPEC member nations will comply with the promised cuts and doubts that the cuts, even if fully implemented, are big enough to offset the collapse in demand for crude. OPEC controls about 40 percent of world crude supplies.
“OPEC has been notorious in the past for not complying with promised output cuts so there is a bit of caution,” said Pervan.
Economic concerns remain the other major preoccupation for the oil market with U.S. earnings results this week expected to confirm the dire state of the world’s largest economy and No. 1 consumer of crude. Hundreds of companies will issue reports including Procter & Gamble Co., Kimberly-Clark Corp. and Starbucks Corp.
Earnings season also is getting into full swing in Japan, the world’s second-largest economy, with Sony Corp. and Honda Motor Co. scheduled to release results later this week.
The likelihood of a prolonged recession in the U.S. that would further reduce demand for crude was underscored by the White House. The American economy will “get worse before it gets better,” Vice President Joe Biden said Sunday.
“From a logical point of view, there is no reason for spot Nymex crude oil to trade above $40,” analyst and trader Stephen Schork wrote in his daily publication, The Schork Report. “OPEC is cutting production because no one is buying their oil. And, given the dire global economic outlook … that is not about to change.”
Ritterbusch said in the near term prices are likely to swing between the mid-$30 range on the down side and the mid-$50 to low-$60 range on the high side.
In other Nymex trading, gasoline futures rose 1.8 cents to $1.17 a gallon while natural gas fell 1.1 cents to $4.479 per 1,000 cubic feet. Heating oil rose 1.55 cents to $1.4425 a gallon.
In London, the March Brent contract rose $1.24 to $48.19 on the ICE Futures exchange.