Global oil futures rose sharply last week to hit four-month highs on paradoxical signs of both global supply tightness, and expectations for more US production from the still growing fracking sector.
The continuing trade talks between the US and China helped push prices higher because there were no reports of the discussions breaking down.
Venezuela continued to be an irritant for those wondering about oil supplies, OPEC seems to have managed to trim production, as per the extension of the production cap late last year and there was a small rise in the number of rigs looking for oil in the US for a second week in a row.
The US marker crude oil contract – March West Texas Intermediate (WTI) rose $US1.18, or 2.2%, to settle at $US55.59 in New York.
In Europe April Brent, the global marker, added $US1.68, or 2.6%, to $US66.25.
Both WTI and Brent saw the highest price finish for a front-month contract since November 19. WTI prices rose 5.4% higher, while Brent jumped by 6.7%.
OPEC reported earlier in the week that its crude output had fallen by nearly 800,000 barrels a day in January to average 30.81 million barrels a day, with the bulk of the cuts coming from Saudi Arabia.
The International Energy Agency’s monthly oil market report, also released last week, reported the Saudis had cut production by 400,000 barrels a day last month, to average 10.24 million barrels a day.
Saudi Arabia said last week that it would cut output further in the coming months, citing oil minister Khalid al-Falih, who told the Financial Times the country would cut an additional 500,000 barrels a day to take production to 9.8 million barrels a day in March.
On Friday, Baker Hughes reported that the number of rigs drilling for oil in the US, a closely watched metric of activity in the sector, rose 3 to 857 this week.
And US oil production is expected to hit new milestones faster than previously thought amid booming shale activity, according to the latest forecasts from the US Energy Information Administration.
The EIA said last it now expects domestic crude output to average a record high of 12.4 million barrels a day in 2019, up from its estimate of 12.1 million barrels a day just a month ago. The agency also raised its forecast for 2020 production to 13.2 million barrels a day from 12.9 million.
The EIA said in its monthly short-term energy outlook the new outlook reflects an increase in productive wells, both in the Permian Basin of Texas and the Gulf of Mexico, and the expectation that Permian pipeline constraints won’t slow growth as much as projected in January.