Crude oil prices rallied in Asia trade Monday on declining U.S. oil rig count and indications that major oil producers are ready to jointly tackle the prolonged low prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at $50.08 a barrel at 0325 GMT, up $0.45 in the Globex electronic session. November Brent crude on London’s ICE Futures exchange rose $0.42 to $53.07 a barrel. Nymex crude last week saw the largest one-week percentage gain since the end of August, climbing 8.9%, while Brent registered a 9.4% increase.
Baker Hughes Inc., an industry group, last week reported a decline in the active U.S. oil rig count for the fifth straight week, dropping by nine, bringing the total count to 605, the lowest since June 2010. Rig count is an important gauge of future production.
“Market confidence is up because we are hearing the same message from everywhere that market is rebalancing,” said Barnabas Gan, an OCBC oil analyst, identifying Asia, particularly China, as the main demand driver in the near term.
Oil prices have suffered a major blow due to oversupply. Moreover, reluctance of major oil producers to curb production to protect their market share has kept prices in the trough. Both Nymex and Brent prices are down by nearly half since last summer.
However, recent talk of possible collaboration between members and nonmembers of the Oil Petroleum Exporting Countries has injected some optimism into the market.
Market participants are watching to see if Saudi Arabia and Russia, the biggest non-OPEC producer, will meet later this month to discuss the oil market, as some reports have indicated, said Stuart Ive, a client manager at OM Financial. He noted that Monday trading volume would be small as the U.S. is closed due to a public holiday.
Other data that the market is monitoring include China’s September trade data, set for released Tuesday. ANZ Research estimates China’s exports contracted last month, but the strong balance can offset the pressure of capital outflows.
On Sunday, Qatar’s energy minister, Mohammed Al Sada, said oil prices have bottomed out and supplies from non-OPEC countries will likely turn negative next year, while demand could reach 30.5 million barrels a day from 29.3 million in 2015.
Such upbeat sentiment mirrors the latest projection by the U.S. energy department. Last week, the Energy Information Administration reported daily U.S. crude production will tighten to 8.86 million barrels a day from 9.25 million barrels this year, while the spot average price on the West Texas Intermediate is projected to rise to $53.57 per barrel from $49.53 per barrel this year. The agency also expects the Brent spot average to be $58.57 a barrel in 2016, up from $53.96 this year.
Nymex reformulated gasoline blendstock for November--the benchmark gasoline contract--rose 124 points to $1.4291 a gallon, while November diesel traded at $1.5996, 87 points higher.
ICE gasoil for October changed hands at $482.50 a metric ton, up $0.75 from Friday’s settlement.
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