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Oil rally takes a breather as US drilling activity picks up
OIL started the week on a softer note after completing its longest run of weekly gains in three years as a report showing increased US oil-rig activity took some heat out of the rally.
Futures in New York fell as much as 0.8 per cent after climbing more than 14 per cent over the previous six weeks.
The number of working rigs targeting crude in the US rose for a second week following six weeks of declines, according to data on Friday from oilfield services provider Baker Hughes.
Crude fell even as Asian stocks rose to a six-month high on Monday after earnings and Chinese economic data eased concerns about an economic slowdown.
Crude has rallied around 40 per cent this year as the Organization of Petroleum Exporting Countries and its allies cut production, while unplanned supply losses from Iran, Venezuela and Libya further tightened the market.
The demand outlook remains shaky, with the International Monetary Fund last week cutting its 2019 global growth forecast to the lowest in a decade and the International Energy Agency warning it could reduce its demand projections.
"In the short term, the decline in crude prices reflects the increasing rig count and the IMF's grim outlook for the global economy, but it was also caused by profit-taking," said Takayuki Nogami, the chief economist at Japan Oil, Gas and Metals National Corp in Tokyo. It's too early to say the rally is over amid supply disruptions in Libya and elsewhere, he said.
West Texas Intermediate for May delivery fell 23 cents, or 0.4 per cent, to US$63.66 a barrel on the New York Mercantile Exchange as at 10.30 am in Singapore, after dropping as much as 48 cents earlier. The contract advanced 1.3 per cent last week.
Brent for June settlement declined 9 cents, or 0.1 per cent, to US$71.46 a barrel on the London-based ICE Futures Europe exchange. The contract increased 1.7 per cent last week. The global benchmark crude was at a premium of US$7.68 to WTI for the same month.
US working rigs rose by two to 833 last week, Baker Hughes said. While the number of drilling rigs has dropped from its recent peak of 888 in November, US production has continued to hit new highs, with the latest government data showing it's at a record 12.2 million barrels a day.
The MSCI Asia Pacific Index rose 1 per cent on Monday to near the highest level since October last year. BLOOMBERG