Oil holds gains as optimism outweighs U.S. drilling increase

Xavier Trudeau
Juillet 17, 2017

Oil prices firmed on Monday, supported by a slowdown in new rigs looking for crude and a perception of strong demand.

Futures were little changed in NY, after rising 5.2% last week. USA drillers targeting crude added two last week, the smallest increase since May.

While oil advanced last week, prices in NY are still below US$50 a barrel on concerns expanded global supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies as part of a deal to help rebalance the market.

"There's an expectation demand will pick up on seasonal factors in the third quarter", said Kim Yumi, a market strategist at Kiwoom Securities. "However, we may see bigger risks on the supply side, especially from rising United States production and stockpiles, once seasonal demand wanes in the fourth quarter".

West Texas Intermediate crude futures for August delivery were marked 0.34% higher from their Friday close at $46.70 in the opening hours of European trading while Brent contracts for September, the global benchmark, were seen 0.25% higher at $49.03 per barrel. Industrial output, which rose 7.6% from the same period a year ago, paced the GDP gains, while an 11% surge in retail sales underscored the strength of the domestic consumer economy. Prices climbed 4.7 per cent last week.

United States drillers added two oil rigs in the week to July 14, bringing the total count up to 765, energy services firm Baker Hughes said on Friday. It is the second week of renewed growth after drillers snapped a 23-week stretch of advances at the end of June. Rig additions over the past four weeks averaged five, the lowest since November 2016.

Global oil prices rose to the highest level in almost two weeks after better-than-expected economic data from China boosted demand speculation amid signs that the pace of USA production may be slowing.

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