Oil markets cautious on Middle East tensions, increased US drilling

SINGAPORE: Oil trading was cautious on Monday amid ongoing tensions in the Middle East and after a rising rig count in the US suggested producers there are preparing to increase output.

Brent crude futures were at US$63.55 per barrel at 0614 GMT, up three cents from their last close. US West Texas Intermediate (WTI) crude was at US$56.79 per barrel, up five cents.

Traders said crude prices were generally well supported as ongoing output cuts led by the Organization of the Petroleum Exporting Countries ( OPEC) and Russia have contributed to a significant reduction in excess supplies that have been dogging markets since 2014.

“The excess of OECD oil inventories over their five-year average levels has fallen by more than 50 per cent in 2017, with inventories currently at around 160 million barrels. If current trends continue, inventories are likely to return to the five-year average at some stage in 2018,” consultancy Timera Energy said on Monday, adding that strong demand had also helped reduce the glut.

On the supply side, tensions in the Middle East raised the prospects of disruptions, traders said.

Bahrain said over the weekend that an explosion which caused a fire at its main oil pipeline on Friday was caused by sabotage, linking the attack to Iran, which denied any role in the incident.

Despite the Middle East tensions and OPEC-led supply cuts, traders were cautious in betting on further price rises, not least because of an increase in US drilling for new production.

US drillers added nine oil rigs in the week to November 10, the biggest jump since June, bringing the total count up to 738, Baker Hughes energy services firm said on Friday. — Reuters