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July 8, 2016 8:15 AM, EDT

Oil Trims Weekly Drop as US Production Falls Most Since 2013

J. N. Stuart/Flickr

Oil trimmed its biggest weekly decline in three months as investors weighed the largest drop in U.S. output since 2013 and a jump in payrolls against a smaller-than-expected stockpile decline.

Futures rose as much as 1.8% in New York, bringing the weekly loss to 6.4%. Prices lost 4.8% July 7 after government data showed crude stockpiles fell 2.2 million barrels last week, a smaller drop than forecasts and industry data suggested. U.S. production slumped 194,000 barrels a day, or 2.3%. America’s job market stirred to life in June as payrolls climbed by 287,000, the most since October, after a two-month lull.

Oil has traded between $45 and $51 a barrel in the last month after almost doubling from a 12-year low in February amid supply disruptions and falling U.S. output. The recovery has prompted American producers to begin returning drilling rigs to service, leading to speculation the decline in production will slow.

“Steadily declining U.S. crude production continues to underpin our view that the global market has shifted from massive oversupply to broadly balanced in the second half,” Mike Wittner, head of oil market research at Societe Generale SA, said in a report.

The grade fell $2.29 to settle at $45.14 on July 7, the lowest since May 10. Total volume traded was about 13% below the 100-day average.

Brent for September settlement gained as much as 83 cents, or 1.8%, to $47.23 a barrel on the London-based ICE Futures Europe exchange. Prices dropped $2.40, or 4.9%, to $46.40 a barrel on July 7. The global benchmark crude traded at a 56-cent premium to WTI for the same month.

Crude production in the United States tumbled to 8.43 million barrels a day in the week ended July 1, the lowest since May 2014, according to the EIA report. The number of active oil rigs in the United States has increased in four of the last five weeks, Baker Hughes Inc. data show. Explorers have idled more than 1,000 oil rigs since the start of last year.

U.S. crude inventories dropped a seventh week to 524.4 million barrels, the lowest since March 11, according to EIA data. It was a shallower reduction than the forecast 2.5 million-barrel decline and the 6.7 million drop reported by the industry-funded American Petroleum Institute. Supplies have fallen from an 87-year high of 543.4 million barrels in the last week of April.

Oil-market news:

• A strike by oil workers in Nigeria entered a second day and a gradual shutdown of facilities is in progress, the Pengassan union said. The government will meet with union leaders on Monday, Oil Minister Emmanuel Kachikwu said. “Gaps in confidence” are hindering talks with militants who are attacking the nation’s oil facilities, he said.

• Argentina is importing crude for the third time this year, putting pressure on the government to ease its fixed price for domestic oil.

• While oil inventories and production continue to decrease, the EIA may be underestimating the output from drilled-but-uncompleted shale wells, Citigroup Inc.’s analysts including Eric Lee said in an emailed report dated July 7.