Oil hits highest level of year as agency says prices may have bottomed

Crude oil prices jumped to their highest point of the year after an organization that represents major oil-consuming nations said Friday there are signs that the market has “bottomed out.”

U.S. benchmark crude added 66 cents to $38.50 a barrel, finishing the week with its fourth straight weekly advance. In London, brent crude climbed 34 cents to $40.39 a barrel.

Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged below $30 per barrel from well over $100 per barrel just two years ago.

A broad retreat by the energy sector played out again Friday on both fronts.

The number of active oil and natural gas rigs in the U.S. fell for the 12th consecutive week to 480, according to Baker Hughes on Friday. That’s the lowest level in decades, and perhaps the fewest since the earliest days of the oil drilling industry.

And Texas driller Anadarko Petroleum said that it would cut 1,000 workers, 17 percent of its work force.

The pain at Anadarko and other energy companies may finally be translating into a reduction of a massive and global oversupply of oil, the International Energy Agency said Friday.

OPEC production tumbled by 90,000 barrels a day last month, the IEA said. U.S. production that had surged due to new drilling technology is expected to fall by almost 530,000 barrels a day this year, according to the IEA.

The Paris organization, however, said that the recovery in crude prices in recent days from multi-year lows does not mean that there will be a significant and sustained rebound in the short-term. There have been sharp declines in demand, particularly in the United States and China, it said.

China, the world’s second-largest oil consumer, is attempting to quell anxiety over a slowing economy and labor unrest. Earlier this month, it cut its growth expectations for the year.

Goldman Sachs said Friday that production is unlikely to increase in the U.S. until 2017, and that prices could volatile in the next few months.

Analysts with Goldman said that if U.S. drillers ramp up production with any rise in oil prices, “we believe a self-defeating rally in oil prices/equities could result.”

The report buoyed stocks of energy companies Friday, making the sector the second-best performer on the Standard & Poor’s 500 index.

This story was originally published March 11, 2016 at 3:42 PM with the headline "Oil hits highest level of year as agency says prices may have bottomed."