Oil Edges Up as U.S. Rig Count Likely to Fall Further
TOKYO – Oil markets edged up on Friday to halt a two-day drop, helped by expectations that data later in the day would show a continuing decline in the U.S. oil rig count, a clear sign of the pressure the tumble in crude has put on oil producers.
A weekly survey by Baker Hughes last week showed the U.S. oil rig count fell to its lowest since August 2011, though government data indicated U.S. oil output has hit 9.2 million barrels a day, the most since 1973. The results of the latest rig count are due around 1800 GMT.
“I assume we’re going to continue to see another big fall and that’s going to provide support for the market,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.
“The expected fall in the second half is being built into current prices.”
London Brent crude for April delivery was trading 49 cents higher at $60.70 a barrel by 0408 GMT after settling down 32 cents on Thursday.
The contract is headed for its first weekly decline in four weeks, of around 1.5 percent. It declined 3.7 percent in the past two sessions after government data showed that U.S. commercial crude oil inventories rose 7.7 million barrels last week, more than double the consensus expectations.
Oil has rallied over the past month, with Brent gaining about 34 percent from a mid-January low as traders covered short positions following a 60 percent crash since June.
“Everybody understands that current prices of $60 for Brent are the bottom-end of sustainability,” Nunan said. “But $50 for WTI is probably too low for long-term sustainability and therefore you’re going to see drops in drilling and drops in capital spending for the upstream.”
U.S. crude for March delivery, which expires later in the day, was up 50 cents at $51.66. Trading was quiet in Asian hours as markets in China, Singapore and several other countries were closed for the Lunar New Year holiday.
The market got support earlier in the week on renewed geopolitical concerns after Islamic State laid claim to a North African outpost in Libya, threatening to use it to attack Europe.