Oil futures rise on hopes for US crude oil production drop

Oil futures rise on hopes for US crude oil production drop

13 April 2015, 17:05
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On Monday oil prices rose for a third straight session on lingering expectations that U.S. crude-oil production is set to slow.

On New York Mercantile Exchange light, sweet crude for May delivery recently rose 90 cents, or 1.7%, to $52.54 a barrel. Brent, the global benchmark, rose 85 cents, or 1.5%, to $58.72 a barrel on the ICE Futures Europe exchange, says the Wall Street Journal.

Prices have plunged in recent months amid a growing oversupply of oil in the global market. Companies have responded to low prices with large spending cuts, but those have yet to translate into a drop in production.

The U.S. Energy Information Administration is due to release its drilling productivity report around noon EDT, which tracks production in seven key regions for shale oil and natural gas.

The report forecast last month that crude-oil output in three of those regions would fall in April, and prices rose on the news, though overall oil output from the seven areas was expected to rise.

A further drop in the number of rigs drilling for oil in the U.S sent the oil price higher last week. According to oil-field-services firm Baker Hughes Inc., the count has declined for 18 straight weeks and is at a level last seen in December 2010.

The fall in the number of oil rigs has driven hopes that the sharp growth in the country’s production would soon start to slow.

However, weekly EIA data continues to indicate that production nears multi-decade highs and inventories of crude oil stick to the highest level in more than 80 years.

A number of economists expect the second quarter to be the weakest of the year for prices, because refineries in Europe and Asia typically buy less crude at this time of year as they perform seasonal maintenance.

Some analysts began to bet that oil prices will ascend soon.

We believe the optimism among investors vis-à-vis oil is exaggerated. This has given rise to considerable correction potential which could lead at any time to a sharp fall in prices,” Commerzbank said in a note.

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