Oil up as Russia ready to talk with producers, US rig count drops
SEOUL – Crude oil futures rose on Monday after Russia said it was ready to meet other producers to discuss the situation in the global oil market, where prices have more than halved from last year’s highs due to a persistent supply glut.
A report showing a fifth weekly fall in the US oil rig count also underpinned crude prices.
Brent had risen 38 cents to $48.51 a barrel by 0621 GMT after ending up 44 cents on Friday, while US crude climbed 33 cents to $45.87 a barrel after settling up 80 cents.
“As Russia requested talks, investors seem to expect a possible reduction in oil output to be agreed during rebalancing procedures, with the global supply surplus being too burdensome,” said Yoo-jin Kang, commodities analyst at NH Investment & Securities based in Seoul.
Top oil producer Russia has been unwilling to cut output to support crude prices. Last November, it refused to cooperate with the Organization of the Petroleum Exporting Countries (OPEC) in order to defend its market share.
Russian oil output hit a new post-Soviet monthly high of 10.74 million barrels per day in September, despite a drop in global crude prices to 6-1/2-year lows in August.
But the country is now prepared to meet with OPEC and non-OPEC oil producers to discuss global oil markets if such a meeting is called, its energy minister said. He said a separate meeting between Russian and Saudi officials was being planned for the end of October.
In the short-term, more surplus is seen, with Barclays saying: “Offline US refinery capacity is expected to peak in the coming days, contributing to an already abundant supply of crude oil in the Mid-Continent and on the Gulf Coast.”
Given the weaker oil prices, global oil investments are on track to drop by 20 percent this year – their biggest decline in history, Fatih Birol, head of the International Energy Agency, has said.
Data on Friday showed US energy firms reduced the number of oil rigs by 26 in the latest week, the most since April and the fifth straight weekly fall, a sign low prices were pushing drillers away from the well pad.
Saudi Arabia, however, is continuing with its investments in the oil and gas industry as well as solar energy, its oil minister said.
On the geopolitical front, tensions have intensified with Russia saying its planes had struck 10 Islamic State targets in Syria.
The oil market is now waiting for an indication on when the US Federal Reserve will hike interest rates for further trading cues. The prospect of an imminent hike faded after Friday’s weaker-than-expected US employment data. -Reuters