Crude Futures Extend Gains As U.S. Output Jitters Ease
Crude futures settled higher for the eighth session in a row on Monday as market participants continued to cheer data suggesting that U.S. output could be tightening.
On the New York Mercantile Exchange, crude futures for August delivery added $1.03 cents to settle at $47.07 a barrel, while on London's Intercontinental Exchange, Brent traded at $49.69, up 92 cents, a barrel.
On Friday, oilfield services firm Barker Hughes reported its weekly U.S. rig count fell by 2 to a total of 756, ending a six-month trend of rising U.S. rigs. The weekly rig count is an important barometer for the drilling industry and serves as a proxy for oil production and oil services demand.
Investors cheered the surprise dip in the number of active U.S. drilling rigs, as fears that rising U.S. output would add to the glut in supply have remained front and center, weighing on sentiment for the first half of the year.
Despite the recent rally in oil prices, analysts continue to expect that crude futures will resume their downtrend, as OPEC and its allies are struggling to address the fundamental problem of oversupply, which has pressured prices over the last three years.
"Disappointment about the slower-than-expected market rebalancing will keep prices depressed well into next year," Carsten Fritsch, an analyst at Commerzbank, told the WSJ.
In May, OPEC and non-OPEC members agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.8 million bpd agreed in November last year.
The oil price is down 13% year to date, as strong global demand has been offset by rising output from the United States, Nigeria, Libya and other locations, such as Brazil and the North Sea.
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