Oil Edges Higher After Sinking Below $50

Oil prices rose Friday, recovering from their decline below $50 a day earlier as traders who had made bets on the market falling took profits.

Crude oil on the New York Mercantile Exchange has risen only four trading days out of this year's 12, and three of them have been Fridays -- typically when traders cash in and "square up" their positions. The market has yet to see a sustained rally. Some market watchers say that indicates oil might have more to fall.

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"It will need to see consistent strength over next few days to show that $50 was a bottom. And I'm not convinced of that," said Michael Guido, director of commodity strategy in New York for bank Societe Generale.

Light, sweet crude for February delivery rose $1.51 to $51.99 a barrel on the New York Mercantile Exchange. It is still down by about 15 percent from the beginning of the year.

On Thursday, the contract briefly fell below $50 a barrel for the first time since May 2005 before settling at $50.48, after the U.S. Energy Department reported the biggest increase in crude inventories in more than four years.

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February Brent crude on London's ICE Futures exchange added $1.69 to settle at $53.44 a barrel.

Heating oil futures rose 4.28 cents to settle at $1.5135 a gallon; gasoline futures rose 4.27 cents to $1.3980; and natural gas prices rose 56.2 cents to settle at $6.886 per 1,000 cubic feet.

Skepticism about the Organization of Petroleum Exporting Countries' commitment to delivering 1.2 million barrels of production cuts that were supposed to have started in November have weighed on oil prices this year.

Confirming speculation that mandated cuts were not being met, OPEC said Friday that production from the group in December was 490,000 barrels a day above its October output goal.

OPEC, which has placed compliance with the October decision as key to stemming the recent tumble in oil prices, said in its January report that output from its 10 quota-bound members was 26.79 million barrels a day in December, down 111,000 barrels a day from November.

Most oil analysts say OPEC has fallen short of its compliance with the October agreement by between 400,000 and 700,000 barrels a day.

Vienna's PVM Oil Associates noted some resistance to prices falling below the $50 level while suggesting that -- in the absence of positive market fundamentals -- "next week could see another downward move."

It may take a drop to $45 a barrel before OPEC member Saudi Arabia, which has been vocal about not making further production cuts, rethinks its position, Guido said.

In its latest snapshot of supplies, the U.S. Energy Information Administration said crude stockpiles rose by 6.8 million barrels to 321.5 million barrels in the week ended Jan. 12. It was the biggest barrel-by-barrel gain since October 2002. Analysts had been expecting an increase of just 325,000 barrels, according to a Dow Jones Newswires survey.

Gasoline stockpiles rose by 3.5 million barrels and distillates, which include heating oil and diesel, rose by 900,000 barrels. Both were at or above the upper end of the average range for this time of year, the EIA said.

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