Oil surged for a fourth day, moving into a bull market on speculation that reduced investment will curb crude production. Brent crude, the benchmark for more than half of the world’s oil, closed more than 20 percent above its Jan. 13 settlement, a common definition of a bull market. BP Plc said on Tuesday it will cut spending by 13 percent after oil slumped. U.S. drillers idled 94 rigs last week, the most in data starting in 1987, according to Baker Hughes Inc.
Prices are down 50 percent since June. Chevron Corp. and Royal Dutch Shell Plc lowered their spending targets for this year as the industry cut more than $40 billion from budgets. Hedge funds and other speculators held the largest number of short contracts in the U.S. benchmark in four years last week.
“There’s certainly been a lot of enthusiasm for going long this market given the low prices,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “There have been several times over this cycle that we’ve had investors push prices higher, only to soon get burned. That could easily be the case this time as well.”