Oil traded at an almost two-month high in London amid speculation that a slowdown in US drilling may curb production.
Brent crude futures climbed 1.1 percent in London on Monday, extending a third weekly gain. US drillers cut the number of rigs in service by 84 to 1,056, the lowest since August 2011, data from Baker Hughes Inc. show. Still, the decline isn’t steep enough to sufficiently curb production and address the current excess, according to Goldman Sachs Group Inc.
The US is pumping oil at the fastest pace in three decades as a combination of horizontal drilling and hydraulic fracturing unlocks supplies from shale formations including the Permian and Eagle Ford in Texas and the Bakken in North Dakota. Oil prices are recovering faster and the supply surplus is smaller than previously expected, Kuwait Oil Minister Ali Al-Omair said.
Brent for April settlement rose as much as $1.05 to $62.57 a barrel on the London-based ICE Futures Europe exchange, the highest since Dec. 22. It climbed 6.4 percent last week. The European benchmark crude traded at a premium of as much as $8.50 to WTI for the same month, the widest since August.
Drillers in the US, the world’s largest oil consumer, have idled 519 rigs in the past 10 weeks, a 33 percent reduction, according to Baker Hughes, a Houston-based oil-field services company. 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.
The decline in the number of US drilling rigs is still not enough to halt production growth, according to Goldman Sachs Group Inc. “Oil prices need to remain lower in the coming quarters in order for the announced capex guidance and rig reduction to materialize into sufficiently lower production growth," Goldman said.
Libya Output
Libya’s National Oil Corp. said it would stop pumping crude at all fields if the authorities fail to contain attacks on facilities that has reduced output to the lowest in a year.
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 Hariga, he said earlier.
Libya’s daily output, which averaged 1.6 million barrels before the 2011 rebellion that ended Muammar Qaddafi’s 42-year rule, was estimated at 300,000 barrels in January, a Bloomberg survey of oil companies, producers and analysts showed.
Price Recovery
Brent gained about 38 percent since Jan. 13 when it fell to $45.19 a barrel. Oil prices will continue to recover in the second half of this year and the global crude surplus is less than the 1.8 million barrels a day the country previously estimated, according to Kuwait’s Al-Omair.
“We were expecting oil prices to recover in the second half, but they recovered faster than what we expected,” Al-Omair said at an industry conference in Kuwait City. “I expect oil prices to keep improving.”
The Persian Gulf state producer plans by next year to add 40 more drilling rigs and raise production capacity to 3.15 million barrels a day, a 5 percent increase from today, Hashem Hashem, chief executive officer of state-run Kuwait Oil Co., told reporters at a conference in Kuwait City on Monday.
