Oil prices rise on low US rig count, firmer stock mar­kets

The Pak Banker - - MARKETS/SPORTS -

Oil prices rose on Mon­day as a fall in U.S. oil drilling rig num­bers lifted the prospect of lower crude pro­duc­tion and a bounce in stock mar­kets en­cour­aged buy­ing sen­ti­ment. US crude fu­tures CLc1 rose above $30 a bar­rel, gain­ing 95 cents to $30.59 a bar­rel by 0956 GMT, or 3.2 per­cent. In­ter­na­tional bench­mark Brent LCOc1 was up 89 cents at $33.90 a bar­rel.

Global stock mar­kets ex­tended last week's gains, bring­ing a more up­beat tone to com­mod­ity mar­kets. "Pos­i­tive sen­ti­ment on the stock mar­ket and the im­pact of the lower U.S. rig count gives some sup­port to oil prices," said Hans van Cleef, se­nior en­ergy econ­o­mist at ABN Amro in Am­s­ter­dam.

U.S. oil drillers have re­duced the num­ber of rigs they are us­ing to the low­est level since De­cem­ber 2009, Baker Hughes data showed.

The de­cline lifted ex­pec­ta­tions that out­put from the United States would fall and help ease a global sup­ply glut that has brought prices to the low­est level in over a decade.

"The cur­rent rig count im­plies ... an­nual av­er­age U.S. pro­duc­tion would de­crease by 445,000 bar­rels per day yoy (year-on-year) on av­er­age in 2016," Gold­man Sachs an­a­lysts said in a re­port.

De­spite Mon­day's gains, an­a­lysts said mar­ket con­di­tions re­mained weak, es­pe­cially as de­mand is slow­ing.

"The sharp de­cel­er­a­tion in de­mand growth in re­cent months (es­pe­cially gaso­line) is a key fea­ture of our more bear­ish view and ex­pec­ta­tions for a longer re­bal­anc­ing pe­riod," Mor­gan Stan­ley an­a­lysts said.

"China de­mand looks par­tic­u­larly chal­lenged with sev­eral neg­a­tive trends of late," they added. In the United States, record crude stocks of 504.1 mil­lion bar­rels were also weigh­ing on mar­kets, coun­ter­ing a pro­posed pro­duc­tion freeze at Jan­uary lev­els by Rus­sia and the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries.

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