Oil held gains above $46 a barrel as optimism that demand will help shrink supplies outweighed an increase in US rigs drilling for crude.
Futures were little changed in New York, after rising 5.2 percent last week. Stockpiles will drop at a faster pace worldwide this half of the year as demand rises and OPEC members comply better with an output-cut agreement, according to Haitham al-Ghais, Kuwait’s governor to the group. U.S. drillers targeting crude added two rigs last week, the smallest increase since May.
While oil advanced last week, prices in New York are still below $50 a barrel on concerns expanded global supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies as part of a deal to help rebalance the market. The group’s output climbed last month to the highest this year as members exempt from the deal — Nigeria and Libya — pumped more and others slipped in delivering their pledged curbs.
“There’s an expectation demand will pick up on seasonal factors in the third quarter,” Kim Yumi, a market strategist at Kiwoom Securities Co., said by phone in Seoul. “However, we may see bigger risks on the supply side, especially from rising U.S. production and stockpiles, once seasonal demand wanes in the fourth quarter.”
West Texas Intermediate for August delivery was at $46.66 a barrel on the New York Mercantile Exchange, up 12 cents, at 1:48 p.m. in Hong Kong. Total volume traded was about 28 percent above the 100-day average. Prices gained $2.31 to $46.54 a barrel last week.
Brent for September settlement added 16 cents, or 0.3 percent, to $49.07 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 4.7 percent last week. The global benchmark crude traded at a premium of $2.20 to September WTI.
See also: Oil gets respite as short-sellers give summer optimism a chance
The number of active oil rigs in the U.S. rose to 765, according to Baker Hughes data reported Friday. It’s the second week of renewed growth after drillers snapped a 23-week stretch of advances at the end of June. Shale explorers have been the driving force behind a surge in U.S. production, more than doubling the rig count from a low of 316 in May 2016.
China is on pace to produce the least amount of oil this year since 2009 as a bear market weighs on domestic drilling. Hedge funds increased their WTI net-long position by 19 percent to 178,654 futures and options over the week ended July 11, the sharpest increase in seven weeks, according to data from the U.S. Commodity Futures Trading Commission. U.S. imports of Saudi Arabian crude — usually medium or heavy grades — “slowed substantially” over the past five months as the Middle East nation reduced output of those varieties compared to lighter oil, analysts at Bank of America Merrill Lynch said in a note.
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