Oil stead­ies as US rig count drop off­sets stock­pile worry

The Pak Banker - - MARKETS/SPORTS -

Oil prices stead­ied today, par­ing losses af­ter a re­newed drop in U.S. oil rigs, but an­a­lysts and traders said there could be an­other sell­off in the com­ing week if U.S. crude stock­piles hit record highs again.

Ear­lier in the day, U.S. crude futures slid 4 per­cent and Brent be­low $40 a bar­rel, ex­tend­ing bear­ish sen­ti­ment from Wed­nes­day when the U.S. gov­ern­ment re­ported a crude in­ven­tory build three times above mar­ket ex­pec­ta­tions.

But data later on Thurs­day from oil ser­vices firm Baker Hughes, show­ing U.S. oil drillers cutting 15 rigs this week af­ter a pause last week, boosted sen­ti­ment. The U.S oil rig count now stands at 372, the lowest since Novem­ber 2009. US crude's front-month con­tract CLc1 set­tled down 33 cents at $39.46 a bar­rel, re­cov­er­ing from a ses­sion low of $38.33. For the week, it rose two cents, fin­ish­ing up for a sixth straight week.

Brent's front-month LCOc1 set­tled down 3 cents on the day at $40.44 a bar­rel, af­ter an ear­lier drop to $39.22. For the week, it fell 76 cents, or nearly 2 per­cent, its first de­cline in six weeks.

De­spite the stum­ble, oil prices re­main about 50 per­cent higher from multi-year lows hit in Jan­uary from glut wor­ries. While de­clin­ing U.S. oil out­put and strong gaso­line de­mand were re­spon­si­ble for some of that re­cov­ery, the bulk of it was pow­ered by ma­jor pro­duc­ers' plans to freeze out­put at Jan­uary's highs.

While this week's drop of oil 15 rigs was not a game changer to the mar­ket, it of­fered a re­prieve to wor­ries that there was a daily glut of some two mil­lion bar­rels in crude.

"Af­ter last week's in­crease of one rig, some may have as­sumed that the con­tin­u­ing de­crease in rig counts was fi­nally abat­ing," said Pete Dono­van, bro­ker at Liq­uid­ity Futures in New York.

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