Oil halted downward slide in February, but worst may not be over

The Canadian dollar moved higher after oil closed out February at a higher price than it achieved a month ago.

West Texas Intermediate, the most common North American contract, was up $1.11 at $49.27 US a barrel in trading Friday afternoon. That’s an improvement on the $48 level a month ago, though still down seven per cent since the beginning of the year.

Brent oil, the international contract, was at $62.07 U.S. a barrel on Friday, up from the $52 level a month ago.

Oil has been on a downward trajectory since last September and the real rout began in November, after the Organization of Petroleum Exporting Countries opted not to reduce its daily production.

Slowing global demand for petroleum products, combined with rising output, especially in North America, has been a recipe for very volatile oil prices.

Is it the bottom?

But after six months of moving downward, many believe oil may be at the bottom of its range.

"Do I think we’ve hit a bottom. I think so. We may test it again, but we won’t be there for long," says Dirk Lever, managing director of Altacorp in Calgary.

He said market watchers are looking at the layoffs and reductions in capital spending from companies in Calgary, the U.S. and in Europe and foreseeing an end to the glut.

"It’s been going on for a little while, so it’s starting to have an impact. There is a bunch of companies that are holding back producing new oil. It’s usually six to nine months before most of that backlog is dealt with," Lever told CBC News.

Oilfield services company Baker Hughes Inc. reported today that the number of rigs exploring for oil and natural gas in the U.S. fell by 43 this week to 1,267. A year ago 1,769 rigs were active.

Some economists say oil demand is on the upswing, with China and the U.S. using more.

Supply outages in the North Sea and the shutdown of Libya's production helped boost the price of Brent oil. In the U.S., some refineries are shut for maintenance while others have been affected by a strike.

But this might not yet be the low point, because real output of oil has not slowed.

"Evidence suggests the worst is over for oil because prices have stabilized," said Neil Atkinson, head of analysis at Lloyd's List Intelligence.

TSX responds to higher oil

"However, there is an argument that we have paused on a long-term downtrend as these is an ongoing surplus of demand," he told CNBC.

U.S. crude inventories continued to grow, adding another 8.4 million barrels to storage last week, according to government data.

So much U.S. shale oil is being pumped out of the ground it is being stored in tanks waiting to be used. That's why some analysts say prices could fall as low as $35.

Today’s higher oil prices and improved commodities prices pushed up resource stocks in Toronto.

The TSX was up most of the day, but fell seven points at the close to 15,235.

Financial stocks moved higher after Canadian banks turned in a better than expected earnings performance this week.

The Canadian dollar edged higher to 79.96 US cents.