Updated from 1:35 p.m. EDT
Propped up by bullish Wall Street research, oil gained Monday following a monthlong slide that has lopped 18% off its price.
The new July crude closed up 51 cents at $49.16 a barrel. Gasoline prices fell about 2 cents to $1.39 a gallon.
Shares of several major oil producers rallied on an upgrade by Sanford Bernstein & Co.
gained $1.20, or 2.17%, to $55.18;
added $2.65, or 2.6%, to $103.76; and
added 93 cents, or 1.8%, to $52.65.
Bernstein's Neil McMahon said the upgrades were driven by his "strengthened conviction and very bullish stance on the underlying fundamentals of oil prices through the next 18 months ... and beyond." He also raised his oil price forecasts to $53 a barrel from $45 this year and $55 a barrel from $40 in 2006.
McMahon questioned OPEC's ability to increase its spare capacity and highlighted the sluggish non-OPEC production growth, maintaining that an imbalance between global tight supply and heightened demand is "persistent" and "irreversible."
Other companies mentioned in the report as having possible upside in this bullish oil scenario were
Other recent catalysts have tended to be bearish for oil. In a speech Friday,
Chairman Alan Greenspan said "inventory accumulation is likely to continue unless demand rises, output declines, or we run out of storage capacity." He added that high oil prices have modestly dampened demand growth, and that the build in inventories could "damp the price frenzy."
Also on Friday, OPEC's president Sheikh Ahmad al-Fahd al-Sabah said that the cartel was comfortable with prices in the range of $40 to $45 a barrel, suggesting OPEC won't cut production when it meets on June 15.
Still, amid repeated assurances from the Saudi helm of OPEC that more production is on the way, other OPEC members expressed concerns over the builds in global inventories. The oil minister of Venezuela said at the weekend OPEC should consider cutting output,
Iranian Oil Minister Bijan Namdar Zangeneh wrote on a government Web site Saturday that OPEC was producing as much crude as it can, and that it has no ability to increase this amount.
Inventories in the U.S. have already risen to their highest levels since 1999, and storage space for the accumulation is rapidly dwindling.
Elsewhere, research analysts at Raymond James said in a report Monday that Russia's declining production curve is likely to contribute to higher oil prices in the next few years. Russian output growth, which in 2004 grew more than all other non-OPEC countries put together, has declined sequentially every month from October 2004 to January 2005. "While production growth in Russia averaged 9% from 2001 through 2004, we think that even a 1-3% average growth over the next three years would be difficult," the analysts said.
"Without Russia, non-OPEC supply growth is very small," Raymond James said. "Because this production growth slowdown serves to increase OPEC's level of control over the oil market, we look at this as a bullish stimulus for oil prices over the next three to five years."
Russia, the second largest oil producer after Saudi Arabia, provides about 11% of the world's oil supply, or 9.3 million barrels a day. The government has been steadily re-exerting control over the country's oil industry, scooping up a big chunk of Yukos and threatening to hike an export tax on foreign producers.
In other corporate news,
, a Tampa, Fla.-based utility company, was cut to neutral from overweight by J.P. Morgan's utility research group. The analysts said TECO's rating change was primarily due to valuation. "We no longer believe the potential upside warrants an overweight rating," they said in a note. Shares dropped 1.26% to $17.24.
Shares of most major oil producers were trading upward Monday, as both the Amex Oil Index and the Philadelphia Oil Service Sector added 1.4%.
rose 1.43% and BP gained 0.59%.