Oil prices strengthened on Monday, supported by a slowdown in the growth of rigs looking for crude in the United States and because of strong refinery demand from China. Brent crude futures, the international benchmark for oil prices, were at $49.04 per barrel at 0353 GMT, up 13 cents, or 0.3 per cent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $46.64 per barrel, up 10 cents, or 0.2 per cent. Both crudes extended gains from strong performances last week. Traders and analysts said the rising prices were a result of strong demand as well as signs that a relentless climb in US oil production was slowing down.
“The slowing pace of increases combined with massive drawdowns last week on both official crude inventory numbers from the US probably explains the positive sentiment in general at the moment,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“Last week’s strong draw on US oil inventories was supported by comments from the IEA that demand is growing stronger than they had initially estimated,” ANZ bank said on Monday. “The relentless climb in drill rigs operating in the US also subsided,” it said.
US drillers added two oil rigs in the week to July 14, bringing the total count up to 765, energy services firm Baker Hughes said on Friday. While that is the highest level since April 2015, the rate of those additions has slowed. Rig additions over the past four weeks averaged five, the lowest since November 2016.
“Given the usual time lag between price signal and drilling decision, the coming month, which also features the E&P (exploration and production) earning season, will be key,” said US bank Goldman Sachs. In Asia, China’s refinery activity continues to indicate strong fuel demand.
Chinese oil refineries increased throughput in June to the second highest on record, with some independent plants raising output even as state oil majors prepare to take drastic steps to cut production during the peak summer season.
Throughput last month hit 46.08 million tonnes, or 11.21 million barrels per day (bpd), a 2.3-per cent rise from a year ago and up from May’s 10.98 million bpd, data from the National Bureau of Statistics (NBS) showed on Monday. The number was just short of December’s record high of 11.26 million bpd.