Oil watchers see stage being set for surging prices

NEW YORK — Investors are laying the groundwork for another bull run on the energy and commodities markets, in spite of signs suggesting the overall economy is still deteriorating.

Analysts and economists are saying with some confidence that oil prices have bottomed out. And Wall Street is taking notice that spot and futures prices for West Texas Intermediate crude have risen by nearly 40 percent since hitting $33 in December. At press time, benchmark WTI was trading at close to $54 a barrel on the New York Mercantile Exchange (NYMEX).

The best data show U.S. demand for oil is still weak. On Tuesday, the American Petroleum Institute reported a 4.6-million-barrel buildup in U.S. crude stockpiles, pushing prices lower. Demand in China is off by at least 15 percent year-over-year, and other bearish economic indicators will likely keep prices volatile in the short term.

But oil market watchers say the Organization of Petroleum Exporting Countries, or OPEC, has conclusively dropped production faster than demand has fallen. The cartel, which controls roughly 40 percent of global oil production, has cut output by about 8.5 percent over the same period last year, while global demand is down by a little over 2 percent, according to the U.S. Energy Information Administration.

New York Times

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