Oil rose above $62 a barrel on Monday, mirroring gains in equities, as investors became confident there would be no further substantial price loss in the run-up to the new year.
Saudi Arabia’s powerful oil minister, Ali al-Naimi, said on Sunday that lower crude prices would help demand by stimulating the economy and slow down supply growth.
“Naimi said that the market would correct itself and was confident that the fall was temporary,” Michael Hewson, chief market strategist at CMC Markets, said.
“The market has calmed down and it is forming a short-term base above $60, and it’s to be expected that there would be a bit of a rebound after such a sharp fall.”
Brent rose 74 cents to $62.12 by 0854 GMT. It is down 46 per cent from the year’s peak in June above $115 per barrel. U.S. crude was up 66 cents at $57.79 a barrel.
OPEC’s decision not to reduce production at a meeting in November sparked the recent rout in oil prices. Prospects for a cut in the near future look remote.
Saudi Arabia is prepared to increase its oil output and claim a bigger market share to meet the demands of any new customers, Monday’s edition of the Saudi-owned al-Hayat newspaper quoted Naimi as saying.
While analysts said Brent would likely remain over $60 a barrel for the rest of the year, they said further large jumps in price were unlikely.
“Any oil relief rally is likely to be limited and short-lived, barring a major outage. We see too many headwinds that must be addressed,” Morgan Stanley said on Monday in a report.
National Australia Bank said: “Given the lead time in permit approval and rig construction ahead of oil production, a sizeable negative U.S. supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year.”
The bank added that it expected Brent and U.S. crude to average $68 and $64 per barrel respectively in 2015.
Analysts also said they expected relatively low price volatility for the rest of the year as traders begin to wind down their 2014 positions.