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Oil trades above US$60 as US production growth seen slowing
[LONDON] Oil gained to trade above US$60 a barrel amid forecasts that US output growth is slowing.
Futures rose as much as 2.2 per cent in New York to the highest level in three days. Production from shale formations in the US fell by about 1 per cent this month and the decline will persist in June, the US Energy Information Administration said on Monday. US crude stockpiles remain more than 100 million barrels above the five-year average for this time of year.
Oil has rebounded from a six-year low in March amid speculation that record US output from shale would slow as companies including EOG Resources Inc reduce exploration. The nation's drillers reduced the number of active rigs last week to the fewest since Sept 2010, Baker Hughes Inc data show.
"I would see the EIA report as the driving news for crude prices," Hannes Loacker, an analyst at Raiffeisen Bank International AG, said by e-mail from Vienna. "In the end, the sharp decline in the US rig count will have a greater and more prompt effect than many thought." WTI for June delivery rose as much as US$1.30 to US$60.55 a barrel in electronic trading on the New York Mercantile Exchange, the highest since May 7. The contract added US$1.08 to US$60.33 a barrel at 12:50 p.m. London time. Total volume was about 7 per cent below the 100-day average for the time of day. Prices have increased 13 per cent this year.
US Supplies Brent for June settlement gained US$1.34, or 2.1 per cent, to US$66.25 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of US$5.95 to WTI.
Output from US shale formations including North Dakota's Bakken and the Eagle Ford in Texas is set to decline in June to a five-month low of 5.56 million barrels a day, the EIA said in its monthly drilling report Monday. Production will shrink by 54,227 barrels a day in May, according to the Energy Department's statistical arm.
Crude inventories in the US, the world's biggest oil user, fell to 487 million barrels in the week ended May 1, EIA data showed last week. That was the first drop since January. Supplies remain near the highest level since 1930, based on monthly records dating back to 1920. Stockpiles probably dropped by 500,000 barrels through May 8, a Bloomberg survey of analysts showed before government data Wednesday.
Drillers seeking oil cut the number of active machines to 668 through May 8, according to Baker Hughes Inc, an oil- services company. The rig count has decreased 58 per cent since December.