Oil held gains above $68 a barrel on slowing American drilling and investor optimism after a breakthrough in a trade standoff between the U.S. and Mexico.
Futures in New York were little changed, following a 1.3 percent gain on Friday. Working oil rigs in the U.S. declined by the most since May 2016 last week, according to Baker Hughes data released Friday. Meanwhile, America and Mexico are poised to resolve their bilateral differences over the North American Free Trade Agreement as soon as Monday after breakthroughs on issues including automobiles and energy.
Crude has continued to trade below $70 this month as a trade war between the U.S. and China, coupled with the threat of contagion from the Turkish currency crisis, has weighed on prices. Still, slowing American output growth and pipeline bottlenecks are adding to supply risks as President Donald Trump is set to impose sanctions on oil exports from Iran in early November at a time when stockpiles are shrinking.
“Falling U.S. rig counts and last week’s decline in U.S. inventories are supporting oil prices amid a protracted U.S.-China trade war that could dampen global growth and weigh on oil demand,” said Stephen Innes, head of trading for the Asia Pacific region at Oanda Corp. “The markets will continue to get a fillip from U.S. sanctions against Iran.”
West Texas Intermediate crude for October delivery traded at $68.49 a barrel on the New York Mercantile Exchange, down 23 cents, at 10:03 a.m. in London. The contract rose 89 cents to $68.72 on Friday. Total volume traded was about 53 percent below the 100-day average.
Brent for October settlement traded at $75.65 a barrel on the London-based ICE Futures Europe exchange, down 17 cents. Prices on Friday added 1.5 percent to $75.82. The global benchmark crude traded at $7.16 premium to WTI.
The Joint Technical Committee of the Organization of Petroleum Exporting Countries and other producers is scheduled to review oil-production cuts Monday. OPEC and allies are currently restoring output to 100 percent of a target set in late 2016 after a period of cutting supplies excessively.
Working oil rigs in the U.S. dropped by nine to 860 last week, according to Baker Hughes. Bakken operators led the way with a cutback of four in North Dakota. That’s after nationwide stockpiles slid more than forecast in the week ended Aug. 17.
Meanwhile, the U.S., Canada and Mexico have been negotiating for a year to overhaul the 24-year-old Nafta at the insistence of Trump. He said Saturday on Twitter that his country could have a “ big Trade Agreement” with its southern neighbor soon. Companies operating across North America have worried that some of the U.S. president’s demands could hurt the region’s economy. — Bloomberg