Oil extended the longest run of gains in six months after U.S. shale explorers paused a record drilling expansion in a sign the boom may be slowing down.
Futures added as much as 2.2% in New York, advancing for a seventh session. Shale explorers broke the longest stretch of uninterrupted growth in three decades as rigs targeting crude fell by 2 this week, bringing the total to 756, according to Baker Hughes Inc. data reported June 30. The rig count has more than doubled from a low of 316 in May.
While prices have surged this week, oil in New York and London are still set for a loss in June — a month in which prices typically gain. Crude futures tumbled into a bear market last week on concerns that rising global supply is offsetting cuts from the Organization of Petroleum Exporting Countries and its partners. Bank of America Corp. became the latest in a string of banks to cut its outlook for prices this year and next.
“I don’t think everyone’s quite ready to write off the OPEC/non-OPEC accord just yet,” John Kilduff, a partner at Again Capital, a New York-based hedge fund, said by telephone. “And given how far we’ve fallen, you’re seeing bargain hunting by some.”
West Texas Intermediate for August delivery gained as much as 97 cents to $45.90 on the New York Mercantile Exchange on June 30, and was at $45.88 at 2:04 p.m. in New York. Total volume traded was about 16% below the 100-day average.
Brent for August settlement, which expired June 30, rose 55 cents to $47.97 a barrel on the London-based ICE Futures Europe exchange.
The rig count drop follows a report June 28 that U.S crude output fell by the most in almost a year last week amid field maintenance in Alaska and tropical storm Cindy, while gasoline inventories fell for a second week. OPEC and its partners aren’t worried about the market recovery and don’t plan to discuss deeper cuts, said United Arab Emirates Energy Minister Suhail Al Mazrouei.
“There is cause to be confident that the long-awaited oil market rebalancing is fast approaching,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “Doubts will linger over the staying power of this rally” and “several stumbling blocks still lie ahead of the price recovery.”
Bank of America lowered its 2017 WTI forecast to $47 and 2018 to $50, citing a continuing rise in oil output and disappointing demand. Prices will remain in contango, where near-term contracts are cheaper than long-dated ones, until the end of the year. Futures will only move into backwardation — the inverse market structure that’s desired by OPEC — by next summer, the bank said.
• Increased demand in the third and fourth quarters will help to rebalance the market, U.A.E.’s Al Mazrouei said June 29.
• Libyan output will increase to almost 1 million barrels a day in the next few days, according to a person with knowledge of the matter, who asked not to be identified.