You are here

Oil retreats after biggest 2-day rise since 2009 as rigs climb

Oil's biggest three-day rally in 25 years stalled as speculation faded that Opec may coordinate supply restraint with other nations to tackle the global crude surplus.

[MELBOURNE] Oil halted its advance after the biggest two-day gain since 2009 as US drilling activity sustained its increase.

Futures slid as much as 1.6 per cent in New York, poised for a third monthly decline. The number of active rigs in the US rose for a sixth week to the most since May, data from from Baker Hughes show. A measure of oil-price fluctuations rose Friday to the highest level since March 31.

Oil rebounded above US$45 a barrel last week amid a rally in commodities and equities as concerns eased over a slowdown in the US and China. Prices are still down more than 25 per cent from this year's closing peak in June on speculation that a global supply glut will be prolonged.

"The retracement is the market coming back to the reality that nothing much has really changed on the supply front," David Lennox, an analyst at Fat Prophets in Sydney, said by phone. "We're not expecting to see any change to the volatility but we do expect that the direction for oil will probably be down rather than up." West Texas Intermediate for October delivery fell as much as 70 US cents to US$44.52 a barrel on the New York Mercantile Exchange and was at US$44.63 at 10:35 am Sydney time. The contract rose 17 per cent through the two days ended Friday, the most since January 2009. The volume of all futures traded was more than three times greater than the 100-day average. Prices are down 5.4 per cent for the month.

Brent for October settlement lost as much as 78 US cents, or 1.6 per cent, to US$49.27 a barrel on the London-based ICE Futures Europe exchange. Prices are 5.4 per cent lower in August, set for a fourth monthly drop. The European benchmark crude traded at a premium of US$4.76 to WTI.