Oil rises Friday hoping to see decline in US drilling

Oil rises Friday hoping to see decline in US drilling

27 February 2015, 16:23
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On Friday oil prices were up, as traders were hoping for reduction in US drilling and as a poll said OPEC output fell in February.

On the New York Mercantile Exchange, light, sweet crude for front-month April delivery was up 83 cents, or 1.7%, to $49.00 a barrel, rebounding from Thursday’s four-week low, says The Wall Street Journal.

The Brent crude contract was up $1.35, or 2.3%, at $61.40 a barrel on the ICE Futures Europe exchange.

In the recent weeks, the oil markets have been fluctuating with investors weighing signs of impending supply cuts and improving demand against indications of continuing global oversupply. The market has arrested the steep fall that prevailed from June to late January but remains volatile as traders assess whether the market rout is over. Brent, the global price benchmark, is up more than 13% in February while U.S. crude is broadly flat for the month.

Analysts are worried there is a weakness behind relative stabilization in the market, with the global oversupply of oil continuing to grow and demand coming from temporary factors such as storing for later sale at a higher price rather than real-world use.

However, there are signs of stabilization. A Reuters survey of shipping data and oil companies showed that oil output from the Organization of the Petroleum Exporting Countries fell in February, as bad weather in southern Iraq delayed tanker loadings and sailings. The estimated output of 29.92 million barrels a day was lower than the cartel’s official target of 30 million barrels a day and the lowest level since last June, when the market collapse began.

The latest U.S. rig-count data will be released by oil-field-services firm Baker Hughes Inc. later on Friday. Investors in recent months considered the number as the primary indication of eventual supply cuts. The number of rigs drilling for oil has fallen by more than 35% since October.

Analysts, however, caution that a reduction in the number of U.S. oil rigs in use doesn’t immediately translate to a fall in output, which is currently running at a multiyear high of 9.3 million barrels a day.

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