Oil’s rally above $65 a barrel is being propelled by a sign that American explorers have curtailed drilling activity as well as speculation that the U.S. could reimpose sanctions on OPEC producer Iran.
Futures added 0.5 percent in New York after capping a third straight quarterly gain, the longest winning streak since 2011. U.S. drillers idled seven working rigs last week, easing concerns over surging shale production. Meanwhile, analysts from Mitsubishi UFJ Financial Group Inc. and UBS Group AG said there are upside risks to oil prices from the potential resumption of sanctions on Iran, which could disrupt the nation’s crude exports.
Crude rebounded over 5 percent last month, recouping February’s losses, after U.S. President Donald Trump named hawkish officials to his government, signaling the nation may pursue a more hard-line stance toward Iran. Even so, concerns persist that a rapid increase in American production, which has topped 10 million barrels a day each week since early February, could undermine efforts by the Organization of the Petroleum Exporting Countries and its allies, which are trying to balance the market by cutting output.
Trump’s position on Iran and declining production from OPEC member Venezuela are causing supply uncertainties that “provide some underlying support for the price,” said Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen. “But the question is whether this is enough to take the prices higher.”
West Texas Intermediate crude for May delivery added 18 cents to $65.12 a barrel on the New York Mercantile Exchange at 2:18 p.m. in Dubai. The contract climbed 56 cents to $64.94 on Thursday. No futures were traded in New York or London on Friday due to the Good Friday holiday. Total volume traded was about 45 percent below the 100-day average.
Brent for June settlement rose 38 cents to $69.72 on the London-based ICE Futures Europe exchange. The May contract climbed 74 cents to close at $70.27 before expiration on Thursday. The global benchmark traded at a $4.62 premium to June WTI.
Yuan-denominated oil futures on the Shanghai International Energy Exchange lost 0.9 percent to 416.6 yuan a barrel. The September delivery contract closed 2.6 percent higher on Friday after debuting last week.
U.S. explorers cut the number of rigs by the most since November 2017 last week, bringing the total to 797, Baker Hughes data showed. Still, the count remains near the highest in three years, and with separate data showing nationwide crude inventories climbed 1.64 million barrels in the week ended March 23, jitters over increasing U.S. supplies remain.
Also in the U.S., Trump’s appointment of Iran hawks Mike Pompeo and John Bolton last month increased the chances that Washington will abandon a deal under which international sanctions on the Persian Gulf state were removed in return for a curbing of its nuclear program.
If measures are reinstated, at least 250,000 to 350,000 barrels a day of oil is at risk of being disrupted, according to Ehsan Khoman, head of research for the Middle East and North Africa at Mitsubishi UFJ. UBS’s analyst Giovanni Staunovo boosted his oil price outlook, citing the potential sanctions as making an increase in prices more likely, especially at a time when OPEC and its allies said they will err toward over-tightening in the market.
The encouraging signs for bulls were echoed in money managers’ net-long positions. Hedge funds have increased their bullish WTI bets to the highest level in seven weeks, according to the U.S. Commodity Futures Trading Commission.
Oil-market news:
OPEC’s shipments will fall to 24.25 million barrels a day in the four weeks to April 14, Oil Movements said in its weekly report. Russia’s decision to cooperate with OPEC and its allies on oil-output levels “played a positive role not only in balancing the market, but also in the additional amount of foreign-currency revenue” gained by the country, Energy Minister Alexander Novak said at a meeting with President Vladimir Putin. — Bloomberg

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