Crude oil prices rose to their highest levels in one-day dollar and percentage gain since December, according to FactSet data. Prices found support on the back of news Monday that Saudi Arabia plans to cut its crude exports and Nigeria agreed to limit its production.
Expectations for a slowdown in U.S. production, after Anadarko Petroleum Corp. cut its full-year spending budget, also contributed to price gains. Brent crude futures rose $1.37 or 2.8 per cent to $49.97 a barrel U.S. West Texas Intermediate futures rose $1.39 or 3 percent to $47.73 a barrel. Lower oil prices in June and July may be affecting U.S. shale production, said Mark Watkins, regional investment manager at U.S. Bank.
“Companies are not drilling as fast they had been in the beginning of 2017,” he said, “They’re not producing as much because it’s much less profitable with prices in the low $40s.”
On Monday, Anadarko Petroleum Corp posted a larger-than-expected quarterly loss and said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so.
Earlier, Halliburton’s executive chairman said growth in North America’s rig count was “showing signs of plateauing. In the U.S. investors have been waiting to see where that top is in oil production,” Watkins said, “We’ve hit a tension point.”
At a meeting of the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC producers on Monday in St Petersburg, Russia, Saudi Arabian Energy Minister Khalid al-Falih said his country would limit crude exports to 6.6 million bpd in August, down almost 1 million bpd from a year earlier.
Nigeria agreed to join the deal by capping or cutting its output from 1.8 million bpd once it stabilises at that level. OPEC said stocks held by industrial nations had fallen by 90 million barrels in the first six months of the year but were still 250 million barrels above the five-year average, which is the target level for OPEC and non-OPEC members.
Market players will watch U.S. crude inventory data due Tuesday afternoon from the American Petroleum Institute and Wednesday morning from the U.S. Energy Information Administration. Analysts estimated, on average, that crude stocks fell 3 million barrels in the latest week.
“The general consensus around the campfire is that you’re going to get sizeable draws in crude and gasoline,” said Robert Yawger, director of energy futures at Mizuho Americas. A weaker dollar is also supporting crude prices, Yawger said. China’s crude imports will exceed 8 million bpd this year and should grow by a double-digit percentage next year, a Sinopec Group executive said.
