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Oil prices firm, rise in US drilling weighs
[LONDON] Oil prices reversed losses on Monday on expectations of an Opec intervention next month to curb production, but a rising rig count in the United States capped gains.
International benchmark Brent crude oil futures rose 23 cents to US$52.18 per barrel at 1151 GMT, after falling to as low as US$51.56 a barrel earlier.
U.S. West Texas Intermediate (WTI) crude oil futures were trading at US$50.46 per barrel, up 11 cents from their last settlement, after hitting a session low of US$49.94 a barrel.
Analysts said that the market is fundamentally supported by expectations that members of the Organization of the Petroleum Exporting Countries (Opec) would take action to support prices at their meeting in Vienna on November 30.
"It's very hard for the Brent crude price to sell below the US$50 a barrel mark ahead of the November 30 meeting," said Bjarne Schieldrop, chief commodities analyst at SEB.
He said that Opec kingpin Saudi Arabia sent a very clear statement about working to curb production and support higher prices, but added that an oversupplied physical crude market was capping further gains in prices. "Record supply from Opec year-to-date, weaker global GDP estimates, and still elevated inventories cause us to lower and flatten our oil price outlook," Bernstein Energy said in a note.
Opec pumped a record 33.6 million barrels of crude oil per day in September, with some members signalling they plan further increases.
Nigeria expects its crude output to rise 22 per cent to 2.2 million bpd by the end of December, oil minister Emmanuel Ibe Kachikwu said. And Libya's output has been steadily rising, hitting 551,000 bpd last week.
Traders said that WTI was under pressure from a report on Friday by oil services provider Baker Hughes showed U.S. drillers added four rigs in the week to Oct 14. It was the 16th week in a row that oil drillers had gone without making cuts, indicating more production to come.
A firmer dollar weighed on prices earlier in the day, as an expected hike in US interest rates later this year drove the US currency to a seven-month high against a basket of currencies.
Dollar-traded oil becomes more expensive for holders of other currencies when the greenback strengthens, potentially limiting demand.