Oil prices rise towards $70 fueling more subsidy fears

Tuesday, 13 Mar, 2018

U.S. West Texas Intermediate (WTI) crude futures fell 27 cents to $61.77 a barrel.

Brent for May settlement added 12 cents to $65.61 a barrel on the London-based ICE Futures Europe exchange.

Helping the dip, hedge funds and money managers cut their bullish wagers on United States crude oil for the first time in three weeks, data showed on Friday.

William O'Loughlin, an investment analyst at Rivkin Securities is of the opinion that "a falling rig count and the strong employment data may have helped support prices". Gross short positions on the New York Mercantile Exchange climbed to their highest level in almost a month.

As the rig count fell, "the market is starting to think that USA shale oil production may not steadily grow, which is supporting oil prices", Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. In a monthly report issued Monday (http://www.marketwatch.com/story/us-shale-oil-output-forecast-to-climb-by-131000-barrels-a-day-in-april-eia-2018-03-12), the Energy Information Administration forecast a monthly rise of 131,000 barrels a day in April U.S. oil production.

Crude prices rose on Friday and earlier on Monday after the USA economy added the biggest number of jobs in more than one-and-a-half years in February.

Energy services firm Baker Hughes said on Friday that energy companies last week cut oil rigs for the first time in nearly two months.

Despite the drop in the rig count, which is often used an as early indicator of future production, activity remains much higher than a year ago when just 617 rigs were active.

"Permian and Bakken shale basins still saw active oil rigs rising by 2 and 3 last week, respectively, and are likely to keep USA oil production on increasing trend", ING said.

Meanwhile, NAIJ.com previously reported that there were indications that the United States and other nations would soon abandon Nigeria's oil, which may negatively affect the nation's revenue generation. The news is not likely to change the outlook for rising US production which is now up to 10.37 million barrels per day (bpd).

USA oil production gains nevertheless are offsetting an effort led by the Organization of Petroleum Exporting Countries to cut into the surplus on five-year oil inventories through output curtailments.