Oil prices have started to edge up from the $11.49-per-barrel low reached last week, but many energy experts are unconvinced that the bottom has been reached in the falloff that has seen prices plummet by 60% since late November.
A modest climb in oil futures prices in the past few days and one Wall Street analyst's "buy" recommendation on oil company stocks helped to fuel Tuesday's near-record 43-point rise in the Dow Jones industrial average.
But several other investment analysts noted that the oversupply of oil that caused the collapse in prices hasn't eased, and it is far from clear that a nervously awaited weekend meeting of the Organization of Petroleum Exporting Countries will lead to lower oil production.
"I'm skeptical about it," said John Hill, vice president at Merrill Lynch Futures in New York. "The bottom line is we still need to see a cutback in OPEC and non-OPEC production."
Of that possibility, analyst Thomas Lewis at Duff & Phelps in Chicago said: "I just don't think it's going to happen. I think we might go to the $10-a-barrel area."
Contracts for April Delivery
The speculation that oil prices had finally scraped bottom was due partly to the recent slight increase in the prices of contracts for April deliveries of a benchmark crude oil traded on the New York Mercantile Exchange.
Those contracts for next-month deliveries, which traded as high as $31.70 a barrel in late November, slumped to $11.49 per barrel at midday on March 5. By week's end, the price reached $12.28. On Tuesday, trading closed at $13.15 per barrel.
Futures trading by speculators normally leads prices for "spot," or non-contract, purchases by a few days and can be several weeks ahead of the contract prices paid for crude oil by major refineries. Those contract prices are currently in the $15-per-barrel range.
The winter collapse in prices, which has brightened the economic outlook for industrial nations by promising lower inflation and higher economic growth, was touched off when Saudi Arabia sharply boosted oil production and flooded the market.
The Saudis and other OPEC members, deeply divided over cutting production to shore up prices, are to meet Sunday in Geneva. That has raised hopes for an agreement to slash production.
On Monday, analyst William Randol of First Boston on Monday declared that prices had bottomed out and said clients should buy stock in oil companies.
"You always have some bulls out there just prior to an OPEC meeting," analyst Lewis said. "Unlike Mr. Randol, we're still negative on the oils."
Energy futures trader Peter C. Beutel, of Rudolf Wolff Futures in New York, said he expects "nervous-type trading" for the rest of this week until the outcome of the OPEC meetings is known.
"It is possible we are seeing the market find a bottom," he said. "But it's very hard to say."
Despite the continued excess of available oil, Beutel said, the markets may have overcompensated for the supply-demand imbalance. He said the recent climb in futures prices "may be a corrective-type movement."
According to the American Petroleum Institute, inventories of crude oil at the end of February were 4.1% higher than at the same time a year earlier, while stocks of gasoline, the predominant oil product, stood 7.6% higher than a year earlier.
While indicating that there is still too much oil and too little demand, the figures show that the imbalance is smaller than it was in December.