Oil Toys with $62 amidst Iranian Friction, US Drilling Pullback

Oil rose, clinging to last week’s gains as political tensions in Iran and declining exploration work in the United States (US) threatened output growth. Futures advanced 0.5 per cent on Monday, settling near $62-a-barrel in New York. A simmering power struggle in Iran has raised anxieties over the stability of OPEC’s third-largest crude producer, Bloomberg reported.

Meanwhile, US explorers cut the number of rigs searching for oil last week by the biggest margin in two months.

The Iran situation “has the market a bit on edge,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund.

Oil has held above $60 a barrel since late December in New York with US crude stockpiles contracting and American oil drilling stalling out. Output curbs by the Organization of Petroleum Exporting Countries (OPEC) and allied suppliers have buoyed prices, with producers promising to continue the curbs for all of 2018.

“The risk at this point is somewhat to the upside, particularly if we continue to see weak drilling numbers in the United States,” Head of Global Commodity Strategy at TD Securities in Toronto, Bart Melek said. Yet at current prices levels, “a significant portion of shale production is viable and profitable.”

West Texas Intermediate for February delivery added 29 cents to settle at $ 61.73 a barrel on the New York Mercantile Exchange. Total volume traded was about 8 percent below the 100-day average.

Brent for March settlement climbed 16 cents to end the session at $67.78 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.06 to March WTI.

Iranian President Hassan Rouhani said the anger that led to a week of antigovernment protests exposed the need for the greater freedoms he has long championed, as well as a stronger economy.

In the US, drillers reduced the oil rig count last week by 5 to 742 rigs. In the midst of investor pressure, explorers are seeking to do more with less in a bid to boost profits, including opening already- drilled wells by fracking them rather than deploying more rigs to start new ones.