Oil edges up towards $49, US drilling slowdown supports

 17 Jul 2017 - 15:52

Oil edges up towards $49, US drilling slowdown supports
(file photo / Reuters)

By Alex Lawler / Reuters

LONDON: Oil edged up to about $49 a barrel on Monday as fewer drilling rigs were added in the United States, helping ease concerns that surging shale supplies will undermine OPEC-led production cuts.

US drillers added two oil rigs in the week to July 14, bringing the total to 765, Baker Hughes said on Friday.  Rig additions in the past four weeks averaged five, the slowest pace since November.

Expectations that a long-awaited crude market rebalancing was under way was also bolstered by the sharp drop in U.S. crude inventories in the week to July 7.

“The most pronounced inventory reduction in the U.S. in 10 months and the resulting decline in U.S. crude oil stocks to below the 500 million-barrel mark in the last reporting week have clearly prompted a shift in sentiment,” said Carsten Fritsch, analyst at Commerzbank.

“The oil rig count only rose by two – yet prices would have responded negatively to this just a few weeks ago.”

Brent crude, the global benchmark, was up 5 cents at $48.96 a barrel by 1219 GMT. U.S. crude traded at $46.49, down 5 cents.

Oil prices are less than half their mid-2014 level because of a persistent glut, even after the Organization of the Petroleum Exporting Countries with Russia and other non-OPEC producers cut supplies since January.

While OPEC-led cuts have offered prices some support, rising supplies from Nigeria and Libya, two OPEC states exempt from the pact, and increasing U.S. production have weighed on the market.

Kuwait said on Friday the market was on a recovery track due to rising demand and said it was premature to cap Nigerian and Libyan output. An OPEC and non-OPEC committee meets in Russia on July 24 to discuss the impact of the deal.

In a sign of strong demand, data on Monday showed refineries in China increased crude throughput in June to the second highest on record. OPEC is hoping higher demand in the second half will get rid of excess inventories.

“There is almost an agreement that the second half of the year should be tighter than the first half due to significant jumps in demand forecasts,” oil broker PVM said. “The net result is a rise in the demand for OPEC oil.”

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