Oil rose to fresh 2016 highs in Asia on Monday as a slowdown in US drilling and increase in Chinese crude refinery processing bolstered hopes a supply glut would ease sooner than expected.
US oilfield services firm Baker Hughes said the number of US drilling rigs fell to its lowest level since October 2009, which is good news for prices as US production is a key contributor to the oversupply.
Chinese crude refineries also processed crude at record rates in April while production dipped to a 14-month low, Bloomberg News reported citing government data released at the weekend.
At about 0420 GMT, US benchmark West Texas Intermediate (WTI) for delivery in June was up 62 cents, or 1.34 per cent, at $46.83 a barrel. Brent North Sea crude for July was up 62 cents, or 1.30 percent, at $48.45.
WTI gained 3.5 per cent and Brent advanced over five percent last week, as the International Energy Agency said the glut could ease in the second half of this year and OPEC oil producers said the oversupply “may be easing” on reduced output by its members.
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“There is evidence that the market is moving back toward balance,” Michael McCarthy, chief strategist at CMC Markets in Sydney, told Bloomberg News.
“Given the proximity to the top of the broader trading range between USD 48 and USD 50 a barrel, it seems less likely that oil can push significantly higher.”
EY oil and gas analyst Sanjeev Gupta said the market will be closely watching the release on Wednesday of US commercial crude inventories, a gauge for demand in the world’s top oil consumer.
Singapore-based CMC analyst Margaret Yang said however that a strong dollar is likely to weigh on dollar-priced oil.
Markets worldwide are eyeing meetings next month of the Organization of the Petroleum Exporting Countries and US Federal Reserve policymakers whose decisions will impact on oil prices.