NEW YORK – Oil prices rallied more than $1 Wednesday to close above $52 after floundering through a volatile trading session that saw crude briefly bottom at a new 19-month low.
The market searched for direction in the lull between Tuesday's comments by Saudi Arabia's oil minister advocating no further production cuts and Thursday's scheduled release of petroleum inventory data.
A barrel of crude hasn't settled below $50 since May 24, 2005. But prices came close Tuesday, sliding as low as $50.28 in early trading before recouping the losses. The price of crude has plunged 14 percent since the year began due to weeks of unusually warm weather in the Northeast and an influx of short positions in the market, or bets that prices would fall.
Andrew Lebow, senior vice president at Man Financial Inc., suggested some of those investors holding short positions began to cover their bets Tuesday, after the market failed to break through $50 a barrel.
"If one was short and the market looked like it was holding the psychologically important $50 level, one might want to buy their short positions back and lock in profits," he said.
Light sweet crude futures for February delivery gained $1.03 to settle at $52.24 on the New York Mercantile Exchange.
Forecasts of ample stocks contributed to the earlier decline, with U.S. inventory figures, to be released Thursday, expected to show increases across the board — crude, gasoline and distillates, such as diesel and heating oil.
March Brent crude on London's ICE futures exchange rose $1.16 to settle at $52.78 a barrel.
Saudi Oil Minister Ali Naimi said Wednesday that despite the recent drop in prices, OPEC members would push ahead with plans to invest billions of dollars to boost production capacity so they could meet growing demand, especially from Asian economic powerhouses India and China.
"Producers in general are not moved by a price movement today, tomorrow or next month. We look at the long future," he told reporters in New Delhi, where he was attending an international energy conference. Saudi Arabia is OPEC's biggest producer.
Oil prices settled below $52 Tuesday, driven lower in part by Naimi's comments that he believed there was no need for further cuts by the 12-member Organization of Petroleum Exporting Countries, according to a report by Dow Jones Newswires.
OPEC has committed to a total cut in output of 1.7 million barrels per day, including a 500,000 barrel-a-day reduction set to begin Feb. 1. A survey by Dow Jones estimates OPEC has cut output by little more than half of its pledged levels. Production remains near 27 million barrels a day or about 700,000 barrels a day above OPEC's target.
Antoine Halff, head of Fimat energy research, suggested that although Naimi's comments were largely taken by the market as bearish, Naimi's expectations for growing worldwide oil demand were bullish.
The Energy Information Administration is scheduled to release inventory data for the week ended Jan. 12 on Thursday, a day later than usual due to Monday's Martin Luther King Jr. holiday.
Market watchers expect gasoline stocks to grow by 2.6 million barrels and stocks of heating oil and diesel fuel to build by 1.3 million barrels, according to a Dow Jones survey of analyst.
Crude inventories are expected, on average, to rise by about 325,000 barrels. However, of eight analysts polled, four expect a draw and four expect an increase. If the data show a draw, it will be the fifth straight week of declining crude stocks.
With the start of a cold snap in the Northeast, heating oil rose nearly 2 cents to settle at $1.4998 per gallon on the Nymex. Natural gas futures dropped by 40 cents to $6.234 per 1,000 cubic feet, while gasoline futures rose less than a cent to finish at $1.3786 per gallon.
Oil has historically cost much less, however. A barrel of crude fetched $41 on average in 2004 and $30 in 2003, according to estimates by Oppenheimer & Co. analyst Fadel Gheit.
Gasoline prices, which surged to record levels above $3 per gallon last summer, have come down along with the price of crude. The average price of unleaded gasoline nationwide is about $2.22, according to AAA.