EDMONTON – Oil prices surged for a fourth straight day Tuesday, pushing the price of benchmark U.S. light crude to $53.05 US a barrel, up $3.48 on the day.
The dramatic move sparked a major rally on the Toronto Stock Exchange, propelling the TSXâ€™s energy subindex to a 4.2-per-cent uptick and the benchmark SP/TSX Composite Index to a 162-point gain.
Dozens of prominent oilpatch players posted even bigger moves Tuesday, with shares of Canadian Oil Sands, Paramount, Bonavista, Trilogy, Baytex, Trican and Total Energy registering double-digit gains.
Still, the surprisingly strong rebound in oil prices from last weekâ€™s six-year lows is likely to run into resistance Wednesday, when the U.S. Energy Departmentâ€™s information arm releases its latest weekly inventory numbers.
Both Brent crude, the key international grade, and West Texas Intermediate (WTI), the main U.S. grade, lost ground after markets closed Tuesday, as traders braced for another spike in already lofty U.S. stockpiles.
â€œThereâ€™s certainly been a lot of enthusiasm for going long in this market given the low prices,â€� John Kilduff, a partner at New York-based hedge fund Again Capital, told Bloomberg.
â€œThere have been several times over this cycle that weâ€™ve had investors push prices higher, only to soon get burned. That could easily be the case this time as well.â€�
Nonetheless, the nearly $10-a-barrel rise in WTI prices over the past few days has raised hopes that the brutal eight-month-long bear market in crude is in its final stages, lifting spirits in Albertaâ€™s beleaguered oilpatch.
The bullish signs include a big drop in capital spending plans by major global producers like BP, Chevron and Royal Dutch Shell, as well as key Canadian players like Cenovus, Husky and Suncor. In total, the industry has slashed roughly $40 billion from 2015 capital budgets, Bloomberg reports.
Meanwhile, the number of active U.S. oil rigs sank to a three-year low last week, lifting hopes that the estimated 1.5-million-barrel-per-day global oversupply of crude will shrink in coming months as the market rebalances.
At the same time, the sharp drop in U.S. gasoline prices helped major auto makers report their best January vehicle sales in at least seven years, with demand for pickups and sport utility vehicles up by double-digits.
The surge in demand for bigger vehicles has in turn lifted demand for gasoline, which is also increasing the odds that the current glut of crude oil may shrink faster than analysts have anticipated.