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Oil halts two-day slide after US rig count resumes decline

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Oil rose for the first time in three sessions after the number of active rigs fell in the US, potentially easing a supply glut.

[NEW YORK] Oil rose for the first time in three sessions after the number of active rigs fell in the US, potentially easing a supply glut.

Futures advanced as much as 1.1 per cent in New York, paring a 4.8 per cent loss in the previous two sessions. Rigs targeting oil in the US fell by 15 to 372, according to Baker Hughes Inc.

More than 150 have been parked since the start of the year. US data last week showed inventories rose by more than three times what was forecast, while imports increased to the highest since June 2013.

Trading was closed Friday for the Good Friday holiday.

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Market voices on:

"The supply-and-demand dynamic has helped out," Chris Weston, a Melbourne-based chief market strategist at IG Ltd, said by phone.

"A lot of people have been saying that they are looking at the rig count because oil prices have obviously moved up quite nicely, and there was a view that we could start seeing it expand above $40."

Oil has climbed back from a 12-year low earlier this year on speculation the global surplus will ease as US output declines and major producers including Saudi Arabia and Russia proposed an output freeze.

Iran and Libya are the only two OPEC members that haven't pledged to attend production cap talks next month.

West Texas Intermediate oil for May delivery gained as much as 42 US cents to US$39.88 a barrel on the New York Mercantile Exchange and was at US$39.77 at 9 am Tokyo time.

Total volume traded was about 64 per cent below the 100-day average. Prices dropped 33 US cents to settle at US$39.46 a barrel on Thursday.

Brent for May settlement rose as much as 24 US cents, or 0.6 per cent, to US$40.68 a barrel on the London-based ICE Futures Europe exchange. Prices slipped 1.8 per cent last week. The global benchmark crude traded at a 85-US cent premium to WTI.

The number of bets on rising oil has barely increased as crude jumped 50 per cent since Feb 11.

Meanwhile, the liquidation of short positions during the last seven weeks covered by data from the US Commodity Futures Trading Commission was the largest in records going back a decade. That suggests the upward pressure on prices has come from traders cashing out of bearish wagers.

The number of active rigs targeting oil in the US dropped to the lowest since November 2009, resuming declines after rising by one the previous week.

Iran, committed to boosting output after sanctions were lifted in January, needs US$40 billion for oil projects in the year ending next March, according to Oil Minister Bijan Namdar Zanganeh.

BLOOMBERG

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