Oil Climbs Above $40 a Barrel on Bullish Sentiment
Oil prices saw further gains on Monday, reaching a two-month high on growing speculation that a 20-month rout may finally be ending. Crude oil for April delivery added $0.53 (1.48%) to $36.45 a barrel after rising to a high of $36.72. Brent oil climbed above $40 a barrel. But some analysts warn that the global glut is still an issue.
Global oil prices have jumped over 40% over the last two months after reaching a 12-year low. The gains on Monday were fueled by new data showing a smaller-than-expected rise in stockpiles in Oklahoma’s U.S. crude delivery hub. There is also speculation that OPEC may be considering a $50 bottom.
Baker Hughes, oilfield services provider, announced on Friday that the number of drilling rigs in the U.S. fell to 392, down by 8, last week.
After reaching a peak of 1,609 in 2014, there are now 69% fewer oil rigs in the U.S. A lower rig count is bullish for oil as it points to lower production in the future.
A rebound in oil prices was also driven by a rise in U.S. equities and investor buying and asset rotation.
Last week, U.S. crude future saw gains of $3.20 (9.58%) for the third straight week. Prices have rebounded by 30% since falling to a 13-year low in February. A decline in U.S. shale production has improved market sentiment.
Brent futures have risen 25% since it fell to below $30 a barrel in February. Prices started improving after OPEC and non-OPEC member Russia agreed to freeze output at January’s levels. A meeting is scheduled for later in the month, during which producers will discuss the details of the proposition.
Global crude production has been outpacing demand due to a boom in shale oil production and OPEC’s decision not to cut production in favor of defending its market share. Oil prices were driven down over 70% as a result.
On Monday, Brent’s premium to WTI crude hovered at $2.67 a barrel, narrowing Friday’s $2.80 gap.
Oil traders will be focusing on U.S. supplies data this week, which is expected to be released on Tuesday and Wednesday.
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