Oil Prices Rise Despite Higher U.S. Rig Count

20/02/2017 13:33 AST

Oil prices edged higher on Monday despite lingering concerns regarding U.S. supply that have kept prices within a narrow trading range despite major producers continuing to curb global supply.

The April contract for global crude benchmark Brent gained 0.49% to $56.08 a barrel while its U.S. counterpart West Texas Intermediate was up 0.32% to $53.95 for March deliveries.

“This low volatility is the result of the market caught between the exuberance of production cuts from the Organization of the Petroleum Exporting Countries and concerns over rising inventories in the U.S.,” said ANZ Research.

Oil came under pressure over the weekend after data indicated the number of rigs drilling for oil in the U.S. rose by six. At 597, the count is the highest since October 2015.

Goldman Sachs said current rig count implies that U.S. output would increase on average by 130,000 barrels a day year-over-year in 2017. The U.S. Department of Energy reported the U.S. produced 8.9 million barrels a day last year and is expected to rise to 9.0 million barrels a day this year.

Analysts say supplies from the U.S. will remain ample given that many U.S. oil companies have been sharpening their technology and focusing on new areas with high oil potential in order to drill at a lesser cost.

“This will result in production growth gathering pace through 2017,” said Société Générale in a research report.

The week ahead is expected to start slowly with trading volumes being affected by a public holiday in the U.S. coupled with a major oil conference in London.

“You won’t see many traders behind their desks today and this should translate as a quiet day for the oil markets,” said Olivier Jakob from the Switzerland-based Petromatrix.

For this week, market watchers will be monitoring the weekly U.S. crude inventory and production data slated for Thursday instead of Wednesday because of the public holiday on Monday. China will also release its January final oil trade data on Thursday.

Nymex reformulated gasoline blendstock for March—the benchmark gasoline contract—rose to $1.5224 a gallon, while March diesel traded higher at $1.6372.

ICE gasoil for March changed hands at $493.50 a metric ton, up $3.50 from Friday’s settlement.

WSJ