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Oil prices rise as IEA says signs of market "tide will turn"
[SINGAPORE] Brent crude oil futures rose above US$49 a barrel on Friday as the IEA said the tide of recent price slumps may turn, although analysts said a strong rebound anytime soon was unlikely as global output continues to outweigh demand.
Oil prices have dropped by more than half since last June as production around the world has soared while demand slows, and although the International Energy Agency (IEA) said that a reversal in trend was possible this year, it added that prices may fall further before the market begins to rise again. "How low the market's floor will be is anybody's guess. But the sell-off is having an impact," the IEA said on Friday. "A price recovery - barring any major disruption - may not be imminent, but signs are mounting that the tide will turn," said the agency. "A rebalancing may begin to occur in the second half of the year," it added.
Benchmark Brent crude futures were trading at US$49 per barrel at 0917 GMT, up 74 cents. US crude was trading at US$47.07 a barrel, up 82 cents.
Analysts said that Brent, which traded steadily above US$48 a barrel before the IEA's announcement, was receiving strong support around current prices. "Our forecast seems to point towards a consolidation stage in the weeks to come," Phillip Futures said in a note."Therefore, we expect crude prices to trade range bound between US$44.75-$50.69 for WTI Mar'15 and US$46.4-52.89 for Brent Mar'15." Despite the price gains, oil was trading in a wobbly market after Switzerland jolted traders already roiled by plunging commodities prices by abandoning its currency cap on Thursday.
The move triggered the euro's biggest one-day drop fall against the Swiss franc in history and an 11-year low against the US dollar. "The potential dollar strength into 2015 may be another factor at play in pressuring oil prices lower. The weakness in the crude space is likely to keep sentiment jittery," Singapore's OCBC bank said on Friday.
Crude oil prices have been pulled lower by multiple factors, OCBC said, starting back in July 2014, when oversupply from major oil producers spooked the market, while demand in Europe and Asia began to ease.
Even in China, Asia's main growth driver, there are signs of weakness as the central bank on Friday announced fresh support measures after data showed a drop in bank lending and foreign investment growth falling to a two-year low.