Crude advanced for the first time in five days on speculation that the falling number of rigs drilling for oil in the US will further curb output.
Futures climbed 1.9 percent in New York, trimming a weekly drop. Rigs targeting oil in the US fell to 595 this week, a five-year low, Baker Hughes Inc. said on its website. Schlumberger Ltd., the world’s largest oilfield services provider, sees oil supply and demand tightening, Chief Executive Officer Paal Kibsgaard said Friday.
Oil has retreated on signs the market remains oversupplied after trading above $50 a barrel last week for the first time since July. U.S. crude stockpiles increased the most in six months through Oct. 9, even as output fell, keeping inventories more than 100 million barrels above the five-year seasonal average, according to government data.
“The market is looking forward and there are expectations of falling North American production because of reduced drilling,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. “The number of rigs is down almost two-thirds from last year and production has held up pretty well so far.”
West Texas Intermediate for November delivery climbed 88 cents to settle at $47.26 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 6 percent higher than the 100-day average. Prices dropped 4.8 percent this week, the biggest decline since August.
Brent for December settlement rose 73 cents, or 1.5 percent, to end the session at $50.46 a barrel on the London- based ICE Futures Europe exchange. The November contract expired Thursday. The European benchmark crude closed at a $2.74 premium to December WTI.
Schlumberger’s Kibsgaard said the market is underestimating how long the industry’s recovery will take. The financial strength of the company’s customers is significantly weaker, he said on an earnings conference call.
US crude output decreased 76,000 barrels a day to 9.1 million last week, data from the Energy Information Administration showed Thursday. Production is down 514,000 barrels a day from a four-decade high of 9.61 million reached in June. Crude stockpiles increased by 7.56 million barrels in the week ended October 9.
Russia wouldn’t rule out discussing possible production cuts with OPEC and non-OPEC countries at a technical meeting next week, Energy Minister Alexander Novak said in Astana, Kazakhstan on Thursday.
The Russian position is that production cuts are “inefficient” as they only result in short-term price gains, Novak told reporters. “Any artificial price increases lead to investment inflows and, in turn, to price declines,” he said.
“The market is likely reacting to the headlines on Russia and OPEC even if that is irrational,” Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London, said by e-mail. “We don’t expect any change in OPEC policy and Russia has said numerous times they will not join in any cuts. But with the OPEC meeting coming up the market is going to be jittery.”