Economy

Drop in Rig Count Gives Early Boost to Prices

Drop in Rig Count Gives Early Boost to Prices

Oil prices stabilised early on Wednesday after posting two days of falls at the start of the week.

US West Texas Intermediate (WTI) crude futures were at $62.22 a barrel up 18 cents, or 0.3 per cent while Brent crude futures were at $65.70 per barrel, up 21 cents, or 0.3 per cent, from their previous close. The U.S. government expects major shale regions to boost output by 131,000 bopd in April, spurring fears that surging supplies will undermine OPEC's efforts to clear a glut.

The reduction came as gross short positions on the New York Mercantile Exchange climbed to their highest level in almost a month.

"Oil prices moved lower. after (the) Energy Information Administration published a report that crude production from seven major US shale plays is expected to see a climb", said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore.

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ING's outlook is in contrast to bullish views from Royal Bank of Canada and Goldman Sachs Group Inc.to BMI Research and Societe Generale SA, which see prices supported as strong demand soaks up supply from the U.S. While Patterson does see healthy oil consumption, he said growth may slow and fail to completely absorb gaining American output. Total volume traded was about 53 percent below the 100-day average. Both oil varieties lost about 1% of their value on Monday. The global benchmark traded at a $3.58 premium to May WTI. Years of mismanagement and lack of investments in the oil industry contribute to the massive drop in production, and in January Venezuela pumped 1.6 million bpd, down by 47,300 bpd compared to December 2017-the largest monthly decline in oil production among OPEC's 14 member states.

Outside the United States, Libya's Zawiya oil terminal returned to normal operations late on Tuesday after workers who were blocking ships from docking agreed to end a one-day strike, two sources said.

The news is not likely to change the outlook for rising USA production which is now up to 10.37 million barrels per day (bpd).

Energy Information Administration data shows that exports have averaged about 1.5 million barrels over the past six months, nearly double the level in the previous six months, with Asia being the biggest buyer. Gasoline futures in NY are down 0.2% at $1.8895 a gallon.


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