West Texas Intermediate and Brent crude reversed two days of losses on Friday amid speculations an industry report later today will show a continued decline in the number of active US oil rigs, reflecting building pressure on producers.
US crude for delivery in April rose 0.44% to $52.06 per barrel by 7:58 GMT, shifting in a daily range of $52.49-$51.87. The contract slid 1.87% on Thursday to $51.83 after the EIA reported a larger-than-expected gain in US crude oil inventories last week. Prices are down 0.1% for the week so far.
Meanwhile on the ICE, Brent for delivery in the same month traded at $60.32 a barrel, up 0.18% for the day. The European benchmark crude slid 0.53% yesterday to $60.21 a barrel and is down 1.5% on the week in what could be its first weekly decline in four. Brent traded at a premium of $8.26 to its US counterpart, down from Thursdays settlement at $8.38.
Investors awaited data by Baker Hughes Inc., due at around 18:00 GMT, that would likely show that US drillers continued to idle rigs for an eleventh week in a response to low oil prices and OPECs unwillingness to cut output.
The oilfield service company reported last Friday that the number of active US rigs slid by 84 last week to 1 056, the fewest since August 2011. Their number has fallen by 519, or 33%, over the past ten weeks.
Drop may not be enough
Research and consulting firm Wood Mackenzie said on Thursday that the US onshore oil and gas drilling count will likely keep declining before reaching 1 000 rigs in August.
However, many analysts think the rig count drop alone wont be able to curb US production and lower oil prices will be needed to balance out the market.
The Energy Information Administration reported on Thursday, a day later due to Mondays Presidents Day holiday, that US producers pumped 9.28 million barrels per day of crude in the seven days through February 13th, up by 54 000 bpd from a week earlier. This was the highest pace of production on records dating back to January 1983.
US crude oil inventories surged by 7.716 million barrels to 425.6 million, the most in at least 80 years. This compared to analysts projections for a gain of 3.23 million barrels and a 14.3-million surge reported by the American Petroleum Institute a day earlier. Supplies at the Cushing, Oklahoma storage hub soared to 46.3 million barrels from 42.6 million a week ago, the highest in more than a year.
Refineries operated at 88.7% of their operable capacity, down from 90.0% a week earlier, with gasoline output increasing to 9.2 million bpd, while distillate fuel output dropped to 4.6 million barrels. Motor gasoline inventories rose by 0.485 million barrels to 243.1 million, while distillate stockpiles slid by 3.814 million to 127.4 million.
Also weighing on the market was the absence of China markets as the country celebrated the Lunar New Year holiday, while a private report showed that Saudi Arabia is boosting oil production in line with its policy to retain market share.
New York-based Pira Energy Group said in a weekly report, citing talks with Saudi customers, that OPECs leading producer is pumping at around 10 million barrels per day, compared to the average of 9.7 million bpd in H2 2014. The kingdom steered OPEC into reaffirming its 30-million-bpd production quota at a November 27th meeting in Vienna to preserve market share and curb US shale oil output.
Meanwhile, Libya hopes to restart within four days the southeastern Sarir oilfield that was blocked by a pipeline blast, CNBC reported, after exports plunged to less than 200 000 barrels per day, just a fraction of total capacity.
In economic news, the US Labor Department reported yesterday that the number of Americans who filed for initial unemployment benefits fell to 283 000 last week from 304 000 a week earlier, while manufacturing activity in the Philadelphia region grew slower than expected in February.
Data on Friday showed that producer prices in Germany fell in January, while a preliminary reading of Frances manufacturing activity in February came in worse than expected as well, dropping deeper in the contraction zone.
Market players now eyed the upcoming manufacturing and services data from Germany, the Eurozone and the US, as well as retail sales in the UK and Canada.
Pivot points
According to Binary Tribune’s daily analysis, West Texas Intermediate April futures’ central pivot point is at $51.46. In case the contract breaches the first resistance level at $53.09, it may rise to $54.36. Should the second key resistance be broken, the US benchmark may attempt to advance $55.99.
If the contract manages to breach the first key support at $50.19, it might come to test $48.56. With this second support broken, movement to the downside could continue to $47.29.
Meanwhile, April’s central pivot point is projected at $59.67. The contract will see its first resistance level at $61.53. If breached, it may rise and test $62.86. In case the second key resistance is broken, the European crude benchmark may attempt to advance $64.72.
If Brent manages to penetrate the S1 level at $58.34, it could continue down to test $56.48. With the second support broken, downside movement may extend to $55.15 per barrel.
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