Oil steadies above November lows

Oil prices steadied above last week’s sevenmonth lows on Monday, hemmed in by a relentless rise in US supply, bloated global inventories and a surge in demand for short sale contracts that signal investors see potential for a price fall.

Investors in US crude futures and options increased their bets against a further rise in prices, as the number of US oil rigs in operation hit its highest in over three years.

US shale oil output is up around 10 per cent since last year, while places like Brazil have also hiked output. The rise in supplies threatens to scupper efforts by the Organization of the Petroleum Exporting Countries (Opec) and its partners to reduce global oil inventories with production cuts. Brent crude futures were flat at $45.54 a barrel by 1335 GMT, set for a near 20 per cent drop in the first half of the year. It hit a trough of $44.35 on June 21, its lowest level since November.

US West Texas Intermediate crude futures were up by just three cents at $43.04 a barrel. “We saw this continued big rise in oil rigs last week and in our view we don’t need a single additional rig for the next 12 months in the US space if we look at balance for 2018,” SEB strategist Bjarne Schieldrop said.

“I don’t think Opec is going to cut deeper, at least not for now. I think it’s keeping its fingers crossed and looking forward to Q3 and Q4 and hoping their medicine will do the trick,” he added. Opec states and 11 other exporters had agreed to extend cuts of 1.8 million barrels per day until March 2018, in the hope that it would force global supply and demand to align.