Oil holds gains amid US drilling slowdown, Libya output threat

[NEW YORK] Oil held gains after a third weekly advance as US companies slowed drilling and Libya's state oil company threatened to halt the African nation's production.

Futures were little changed in New York after climbing 3.1 per cent on Feb. 13. Drillers cut the number of rigs in service by 84 to 1,056, the fewest since August 2011, data from Baker Hughes Inc. showed. Libya's National Oil Corp. said it would stop pumping crude at all fields if the authorities fail to contain an escalation of attacks on facilities that has reduced output to the lowest in a year.

Rising US supply is contributing to a global surplus that drove prices almost 50 per cent lower in 2014. The recovery this year is partly due to a drop in net short positions and a rebound in London-traded Brent futures will stall, predicted Qatar National Bank QSC, the biggest Arab lender.

"There's a renewed level of optimism in the market and that's seeing prices go higher," Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone.

"The rally we've seen will probably extend for a while. We'll take out US$55 soon" for West Texas, he said.

West Texas Intermediate for March delivery was at US$52.55 in electronic trading on the New York Mercantile Exchange, down 23 cents, at 1.52 pm Sydney time. The contract increased US$1.57 to US$52.78 on Friday.

Floor trading on Monday will be suspended for a public holiday and transactions will be booked the following day for settlement purposes. Total volume was about 15 per cent below the 100-day average.

IDLED RIGS

Brent for April settlement was 27 cents lower at US$61.25 a barrel on the London-based ICE Futures Europe exchange. It climbed US$2.24 to US$61.52 on Friday. The European benchmark crude traded at a premium of US$7.88 to WTI for the same month.

Drillers in the US, the world's largest oil consumer, have idled 519 rigs in the past 10 weeks, a 33 per cent reduction, according to Baker Hughes, a Houston-based oil field services company.

The US oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Permian and Eagle Ford in Texas and the Bakken in North Dakota. The nation pumped 9.23 million barrels a day through Feb 6, the fastest pace in weekly Energy Information Administration records dating back to January 1983.

In Libya, a fire at a pipeline carrying crude to the eastern port of Hariga has been extinguished and National Oil plans to re-open it in a week, according to Mohamed Elharari, a spokesman in Tripoli.

Production has been cut by 180,000 barrels a day after the bombing of a pipeline that carries crude to the eastern port of Hariga, he said earlier.

Daily output, which averaged 1.6 million before the 2011 rebellion that ended Muammar Gaddafi's 42-year rule, was estimated at 300,000 barrels in January, according to a Bloomberg survey of oil companies, producers and analysts.

BLOOMBERG