Oil Prices Climb Further On Falling US Oil Rig Count

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Crude oil prices rallied in Asia trade Monday on declining U.S. oil rig count and indications that major oil producers are ready to jointly tackle the prolonged low prices.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at $50.08 a barrel at 0325 GMT, up $0.45 in the Globex electronic session. November Brent crude on London’s ICE Futures exchange rose $0.42 to $53.07 a barrel. Nymex crude last week saw the largest one-week percentage gain since the end of August, climbing 8.9%, while Brent registered a 9.4% increase.

Baker Hughes Inc., an industry group, last week reported a decline in the active U.S. oil rig count for the fifth straight week, dropping by nine, bringing the total count to 605, the lowest since June 2010. Rig count is an important gauge of future production.

“Market confidence is up because we are hearing the same message from everywhere that market is rebalancing,” said Barnabas Gan, an OCBC oil analyst, identifying Asia, particularly China, as the main demand driver in the near term.

Oil prices have suffered a major blow due to oversupply. Moreover, reluctance of major oil producers to curb production to protect their market share has kept prices in the trough. Both Nymex and Brent prices are down by nearly half since last summer.

However, recent talk of possible collaboration between members and nonmembers of the Oil Petroleum Exporting Countries has injected some optimism into the market.

Market participants are watching to see if Saudi Arabia and Russia, the biggest non-OPEC producer, will meet later this month to discuss the oil market, as some reports have indicated, said Stuart Ive, a client manager at OM Financial. He noted that Monday trading volume would be small as the U.S. is closed due to a public holiday.


Other data that the market is monitoring include China’s September trade data, set for released Tuesday. ANZ Research estimates China’s exports contracted last month, but the strong balance can offset the pressure of capital outflows.

On Sunday, Qatar’s energy minister, Mohammed Al Sada, said oil prices have bottomed out and supplies from non-OPEC countries will likely turn negative next year, while demand could reach 30.5 million barrels a day from 29.3 million in 2015.

Such upbeat sentiment mirrors the latest projection by the U.S. energy department. Last week, the Energy Information Administration reported daily U.S. crude production will tighten to 8.86 million barrels a day from 9.25 million barrels this year, while the spot average price on the West Texas Intermediate is projected to rise to $53.57 per barrel from $49.53 per barrel this year. The agency also expects the Brent spot average to be $58.57 a barrel in 2016, up from $53.96 this year.

Nymex reformulated gasoline blendstock for November--the benchmark gasoline contract--rose 124 points to $1.4291 a gallon, while November diesel traded at $1.5996, 87 points higher.

ICE gasoil for October changed hands at $482.50 a metric ton, up $0.75 from Friday’s settlement.

Oil Prices Climb Further On Falling U.S. Oil Rig Count - WSJ

 

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Oil prices rise on lower U.S. rig count although China still worries

Oil prices rose on Monday as the number of U.S. rigs fell for a sixth week, while investors waited for Chinese trade data to be published later this week for clues whether the world's second biggest economy and oil consumer was slowing down further. U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $50.03 per barrel at 0700 GMT, up 40 cents from their last settlement. Internationally traded Brent futures LCOc1 were up 39 cents at $53.04 a barrel. U.S. drillers removed nine oil rigs in the week ended Oct. 9, bringing the total rig count down to 605, oil services company Baker Hughes Inc (BHI.N) said late on Friday. That total was the least since July, 2010. Drillers had cut a total of 61 rigs over the prior five weeks.

Since hitting an all-time high of 1,609 during this week a year ago, weekly rig count reductions have averaged 20.

"The current rig count is pointing to U.S. production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day," Goldman Sachs said in response to the data.

The bank, however, added that "a rapid drawdown of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016".

The slowing U.S. drilling activity has pushed up WTI crude prices about 11 percent this month or almost 30 percent above their most recent low-point in August, although they remain 20 percent below their 2015 highs reached in May as China's slowing economy weighs on markets.

"The downside price risks (to oil) are receding as supply restructuring gathers pace, but the bottoming out process is likely to last for a while yet ... There is unlikely to be a sustainable improvement in commodity prices until global GDP starts to improve and there is little sign of that yet," Barclays said, adding that it had slightly cut its 2015 Brent and WTI price forecasts from $57.50 and $51.60 per barrel respectively to $54.50 and $50 a barrel.

Upcoming Chinese data, starting with import and export numbers on Tuesday, is likely to point to further economic weakness.

Yet as of now, oil is also drawing support from a weaker U.S. dollar, which makes purchases cheaper for holders of other currencies.

The dollar hovered near a three-week low versus a basket of major currencies .DXY, anchored by doubts the U.S. Federal Reserve will raise interest rates by year-end.

"Upside (in oil prices) is likely limited, and we continue to see a range-bound market through year-end," Morgan Stanley said.

Oil prices rise on lower U.S. rig count although China still worries| Reuters

Oil prices rise on lower U.S. rig count; China data eyed - Business Insider