Oil prices rise on low US rig count, firmer stock markets
LONDON – Oil prices rose on Monday as a fall in US oil drilling rig numbers lifted the prospect of lower crude production and a bounce in stock markets encouraged buying sentiment.
US crude futures CLc1 rose above $30 a barrel, gaining 95 cents to $30.59 a barrel by 0956 GMT, or 3.2 percent. International benchmark Brent LCOc1 was up 89 cents at $33.90 a barrel.
Global stock markets extended last week’s gains, bringing a more upbeat tone to commodity markets.
“Positive sentiment on the stock market and the impact of the lower US rig count gives some support to oil prices,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
US oil drillers have reduced the number of rigs they are using to the lowest level since December 2009, Baker Hughes data showed.
The decline lifted expectations that output from the United States would fall and help ease a global supply glut that has brought prices to the lowest level in over a decade.
“The current rig count implies … annual average US production would decrease by 445,000 barrels per day yoy (year-on-year) on average in 2016,” Goldman Sachs analysts said in a report.
Despite Monday’s gains, analysts said market conditions remained weak, especially as demand is slowing.
“The sharp deceleration in demand growth in recent months (especially gasoline) is a key feature of our more bearish view and expectations for a longer rebalancing period,” Morgan Stanley analysts said. “China demand looks particularly challenged with several negative trends of late,” they added.
In the United States, record crude stocks of 504.1 million barrels were also weighing on markets, countering a proposed production freeze at January levels by Russia and the Organization of the Petroleum Exporting Countries (OPEC). Russia and OPEC both pumped oil at near-record volumes last month, with Russia reaching another post-Soviet high of 10.88 million barrels per day (bpd). -Reuters