Forty dollars may be the bottom for oil, analysts say

NEW YORK (MarketWatch) — Crude oil prices have consistently traded above $40 over the past two weeks, fueling expectations that the beaten down commodity has finally stabilized around that level.

After hitting a four-year low of $32.40 a barrel on Dec. 19, oil has now rebounded more than 20%. While occasionally falling below $40 in intraday trading, it has closed above $40 everyday since Jan. 20. Similarly, national average gasoline prices have risen above $1.90 a gallon from below $1.70 a month ago.

“While crude-oil markets may remain vulnerable to further disappointments in […] economic conditions, there is also the potential for a price base to be forming,” wrote Brenda Sullivan, an analyst at Sucden Financial Research, in a note.

Ultimately, analysts say the future direction of oil prices will depend on the outcome of the struggle of two opposing forces.

On the one hand, the weakening global economy is expected to lead demand for oil to fall for a second year, marking the first two-straight-year decline in decades. On the other hand, the Organization of Petroleum Exporting Countries is expected to continue cutting production at a record pace to put a floor under prices.

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