Oil prices rose by 1 per cent on Monday, recovering at least some of last week's steep losses as Asian stock markets found their footing after days of chaotic trading. Looming over oil markets, however, was rising production in the United States which is undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to tighten markets and prop up prices.
Brent crude futures were at $63.42 per barrel at 0250 GMT, up 63 cents, or 1 per cent, from the previous close. US West Texas Intermediate (WTI) crude futures were at $59.83 a barrel. That was up 63 cents, or 1.1 per cent, from their last settlement. The firmer prices came after crude registered its biggest loss in two years last week as stock markets slumped.
But with US stock markets rebounding on Friday and Asian markets seemingly steadying on Monday, analysts said crude was also supported. “The bounce in US stocks means some catch-up is possible (for oil),” said Greg McKenna, chief market strategist at futures brokerage AxiTrader. McKenna said markets on Monday were quiet as “the incentive for traders in Australia or Asia to do anything without the lead of the US is likely to be lacking,” referring to recent US stock market volatility. It is also a holiday in Japan.
But oil markets still face soaring US oil production, which has risen above 10 million barrels per day (bpd), overtaking top exporter Saudi Arabia and coming within reach of top producer Russia. There is a strong indication that output will rise further.
US energy companies added 26 oil rigs looking for new production this week, boosting the count to 791, the highest since April 2015, General Electric's Hughes energy services said on Friday. The soaring US ouput is undermining efforts led by OPEC and Russia to withhold production in order to push up prices. The cuts started in 2017 and are set to last through 2018.