The renewed confidence in oil comes as investors increasingly grow concerned that U.S. crude producers may undermine efforts by the Organization of Petroleum Exporting Countries and its allies to curb output. While Friday’s jump helped push prices higher for the week, futures are still below their peak in January, with the market struggling to recoup losses from last month’s broader market slump.
As the rig count fell, “the market is starting to think that U.S. shale oil production may not steadily grow, which is supporting oil prices,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. “The U.S. economy getting better means oil demand will be stronger.” West Texas Intermediate for April delivery traded at $62.06 a barrel on the New York Mercantile Exchange, up 2 cents at 1:35 p.m. in Tokyo. The U.S. benchmark gained $1.92 to $62.04 on Friday. Total volume traded was about 37 percent below the 100-day average.
Brent for May settlement added 12 cents to $65.61 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 3 percent to $65.49 on Friday. The global benchmark traded at a $3.58 premium to May WTI. American explorers cut the number of rigs drilling for oil by four, the first decline since mid-January, Baker Hughes data showed on Friday. That followed government data showing the U.S. added 313,000 jobs in February, the biggest increase since July 2016 and more than the median estimate of 205,000 new positions.
Still, fears over increasing U.S. production continue to weigh on producers and investors. Iran wants OPEC to work to keep oil prices at about $60 a barrel as an increase toward $70 will encourage shale oil output, Oil Minister Bijan Zanganeh said, the Wall Street Journal reported.
The pessimistic view was echoed in money managers’ short-selling position. Hedge funds boosted bets on falling WTI prices by the most this year after American production surged to record levels, according to the U.S. Commodity Futures Trading Commission.
Other oil-market news:
- China Petrochemical Corp., known as Sinopec, aims to stabilize output from the Shengli oilfield at about 23 million tons by 2020, down from 23.9 million tons in 2015, Kong Fanqun, general manager of the company’s biggest oilfield, said in an interview Sunday.
- Italy’s Eni SpA won a contract with Abu Dhabi National Oil Co. for two offshore oil blocks in the Persian Gulf.
- Saudi Arabian Oil Co.’s listing is unlikely to go ahead this year, the Financial Times reported, citing British officials who were told by their Saudi counterparts.
Sources and photo-credits: Bloomberg