Brent edges up on cautious optimism over Greek debt compromise
SINGAPORE (Reuters) – Oil prices edged up after early falls on Monday as parts of Asia returned from the Lunar New Year holiday, with Brent futures moving further away from $60 a barrel and US contracts moving towards $51.
Brent and US WTI crude futures were helped by cautious optimism that another eurozone crisis over Greek debt had been averted for now by a compromise between Athens and its creditors.
Benchmark Brent crude futures were trading at $60.36 a barrel at 0356 GMT, up 14 cents from their last settlement, while US WTI crude was up 10 cents at $50.91 a barrel.
Despite the small rises, prices remain below last week’s highs as the market remains oversupplied.
US oil production growth is expected to reach 440,000 barrels per day by the fourth quarter of 2015 compared with a year before, based on the current rig count, Goldman Sachs said in a note.
US drilling has slowed since the beginning of the year as producers react to a collapse in oil prices that started in June 2014. But Goldman said the pace of the US rig count decline was also slowing down.
“Despite this week’s slowdown, the current rig count is pointing to US production growth decelerating close to the level required in our view to balance the oil market,” the bank said.
Following the fall from June 2014 to six-year lows, oil prices have picked up since mid-January, with benchmark Brent contracts jumping almost $20 a barrel to touch $63 a barrel last week as traders closed long-standing short positions in reaction to the falling US rig count.
Although both US WTI and international Brent prices dipped in the past week, American contracts fell more sharply, largely in response to record inventories.
This has pulled WTI’s discount on Brent to around $9.50 a barrel, up from parity and even a short-lived premium late last year.
Yet analysts said they expected US prices to recover later this year, once the drop in the rig count translates into lower output.
Although most of Asia is back from the Lunar New Year holiday, markets in mainland China do not reopen until Wednesday.