SINGAPORE – Oil prices on Monday extended sharp rises from the end of last week following a decline in U.S. inventories and drilling, while outages and hopes that exporters could freeze output boosted international prices.
At the same time, analysts said that global oil demand could also accelerate, helping to tighten a market that has suffered from ballooning oversupply since mid-2014.
U.S. crude futures CLc1 were trading at $40.14 per barrel at 0024 GMT, up 42 cents or 1.1 per cent from their last close.
Brent LCOc1 was up 32 cents or 0.8 per cent at $42.26 a barrel.
U.S. energy firms cut oil rigs for a third week in a row to the lowest level since November 2009, oil services company Baker Hughes Inc said Friday, as energy firms slash spending. Drillers cut eight oil rigs in the week to April 8, bringing the total rig count down to 354.
U.S. prices had previously been supported by a drop in U.S. crude stocks, albeit from all-time highs.
Brent was lifted by production outages in the North Sea and West Africa, as well as by hopes that a meeting of exporters planned for April 17 would result lead to an agreement to rein in ballooning overproduction that sees at least one million barrels per day pumped in excess of demand.
With both benchmarks back above $40 per barrel, analysts said that more investors could be attracted if prices now breached highs reached in March, when Brent rose above $42.50 and WTI rose to $41.90 per barrel.
“Crude oil prices are back to or near the March high and a significant resistance point. If oil prices can break above this level, investor sentiment towards commodities should receive a further boost,” ANZ bank said.
Strengthening oil demand would also help tighten the market, Bernstein said in a report.
“Demand growth through to 2020 could well be stronger than the previous decade,” Bernstein said.
The analysts said they expected a mean annual global oil demand growth rate of 1.4 per cent between 2016 and 2020 despite slower economic growth in China, improving fuel efficiency, the rise of electric vehicles and the effects of green policies.
The compared with annual growth of 1.1 per cent over the past decade and an International Energy Agency estimate for demand to grow by 1.3 per cent over the next 5 years, it said.
Bernstein said it expected the market to rebalance in the second half of 2016 due to its outlook for stronger than expected demand. (Reuters)
