By July 3, 2017 Read More →

Oil prices rise on moderating US output

Oil prices

Oil prices rose on Monday on reduced US drilling activity, but analysts are concerned that rising output from OPEC could add to the crude glut. Anadarko photo.

Oil prices up 1.5 per cent Monday

Oil prices rose on Monday, resuming the longest stretch of daily gains in over five years after data showed US drilling activity dropped for the first time since January, but analysts are concerned that rising OPEC production could cap gains.

Brent crude futures were up 71 cents to $49.48/barrel by 11:30 a.m. EDT, up from a session low of $48.79.  US crude futures were up 81 cents to $46.85/barrel.

According to Reuters, crude is up for the eighth straight session, the longest unbroken stretch of gains since February 2012.

“It’s all about market sentiment,” Commerzbank senior oil analyst Carsten Fritsch told Reuters. Last week, data showed a 100,000 barrel per day (b/d) drop in US production due to tropical storms and maintenance, and small a decline in US rig count.

“These… (temporary) factors outweigh the sharp increase in OPEC oil production in June… and the continued increase in Libyan and Nigerian output at least at the moment,” he said.

On Friday, Baker Hughes reported the US rig count had fallen for the first time since January and US government data showed crude output fell in April for the first time this year.

“In our view there is still a significant shortfall in onshore output relative to prior market expectations,” Reuters reported Standard Chartered wrote in a note on Monday.

“We think the fall in prices has caused U.S. output growth to slow, and that revisions for May and June will confirm that supply is growing at a significantly more modest rate than the market has believed up to now.”

Since the beginning of the year, oil prices have fallen over 13 per cent and strong global demand is not enough to absorb increasing production from the US, Nigeria, Libya, Brazil and the North Sea.

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