Oil holds gains near two-month high on signs of shale slowdown2 min read . Updated: 21 Jan 2019, 04:42 PM IST
- Oil is off to its best start to a year since 2001 after plunging almost 40% last quarter
- Meanwhile, OPEC and its partners including Russia have started to cut production to balance the market.
Oil held gains near a two-month high as investors assess signs of slowing growth in US production against mixed signals on output from the OPEC+ coalition.
Futures in New York were little changed after surging 3.3% on Friday. The number of working oil rigs in the US fell to the lowest since May, according to data from Baker Hughes. Meanwhile, International Energy Agency data suggested non-Opec countries that pledged to curb output abandoned that effort in December. Production from the Organization of Petroleum Exporting Countries fell by the most in almost two years that month.
Oil is off to its best start to a year since 2001 after plunging almost 40% last quarter on fears of a global supply glut and weaker consumption. The Paris-based IEA expects relatively strong demand this year despite signs of a slowdown in the global economy. Meanwhile, Opec and its partners including Russia have started to cut production to balance the market at a time when US output is forecast to keep growing.
“Oil is taking a short pause after surging to $54 last week," with US rig data contributing to the gain, said Satoru Yoshida, a commodity analyst at Rakuten Securities Inc. in Tokyo. “While US output is rising and the trend is expected to continue, investors are getting a sense of security from Opec’s production cuts."
West Texas Intermediate crude for February traded at $53.73 a barrel, down 7 cents, on the New York Mercantile Exchange, at 5:21 p.m. in Tokyo. The contract jumped $1.73 to $53.80 on Friday to close at the highest level since Nov. 21, capping a weekly gain of 4.3 percent.
Brent for March settlement fell 22 cents to $62.48 a barrel on the London-based ICE Futures Europe exchange. The contract advanced $1.52 to $62.70 on Friday. The global benchmark crude was at an $8.55 premium to WTI for the same month.
Even as US rig count tumbled by 21 to 852, the biggest decline since May 2016, Energy Information Administration data last week showed American drillers pumped 11.9 million barrels a day. US output is set to expand by 1.1 million barrels a day this year and may exceed Saudi Arabia’s maximum level within the next six months, according to the IEA.
Meanwhile, it remains to be seen whether the Opec+ coalition will cut enough production to counter the surge in US output and clear a supply glut. Before the latest round of production cuts began this month, non-OPEC countries’ compliance rate in December was the lowest since the curbs started in 2017, according to Bloomberg calculations from IEA preliminary data.
That’s in contrast with OPEC, which cut its production by 751,000 barrels a day last month, the biggest decline since they began a previous round of cutbacks, according to the group’s report last week. Saudi Arabia, OPEC’s biggest member, accounted for more than half the reduction.
This story has been published from a wire agency feed without modifications to the text.