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OIL RISES AS OPEC PRODUCERS SIGNAL OPTIMISM OVER MARKET RECOVERY


Wiljor
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Oil traded at the highest price in almost two months in London as OPEC ministers signaled confidence that the market can sustain its rebound.

Futures gained as much as 0.9 percent. There’s a sense of optimism in rising prices and the trend has changed over the past two weeks, Qatar’s Energy Minister Mohammed bin Saleh Al Sada said on Monday. The global supply glut is smaller than a previously estimated 1.8 million barrels a day, according to Kuwait’s Ali Al-Omair, the third-largest producer in the Organization of Petroleum Exporting Countries.

Oil is recovering from the lowest prices in almost six years as drillers in the U.S., which is pumping crude at a record pace amid a shale boom, reduced the number of active rigs to the fewest since August 2011. The market is shifting its focus to tightening supply, according to Standard Chartered Plc.

“We’ve seen the rig numbers, that will impact estimates going forward,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. “There are forecasts for lower production by the end of 2015, especially out of the U.S., and that’s put a halt on the downtrend.”

Brent for April settlement climbed as much as 57 cents to $61.97 a barrel on the London-based ICE Futures Europe exchange and was at $61.80 at 2:08 p.m. Sydney time. The contract fell 12 cents to $61.40 on Monday. The volume of all futures traded was about 47 percent below the 100-day average.

Price ‘Optimism’

West Texas Intermediate for March delivery was 21 cents higher than Friday’s close at $52.99 a barrel in electronic trading on the New York Mercantile Exchange. Floor trading on Monday was closed for the U.S. Presidents’ Day holiday and transactions will be booked Tuesday for settlement purposes.

OPEC, which supplies about 40 percent of the world’s oil, on Feb. 9 made the deepest cut in at least six years to its monthly projection for output growth from other producers, predicting the market’s drop means U.S. drillers will pump less than previously anticipated.

“Brent is near $62 and there’s a sense of optimism surrounding this issue,” Qatar’s Al Sada said at the annual general meeting of Mesaieed Petrochemical Holding Co.

U.S. drillers reduced the number of rigs in service by 84 to 1,056, according to Baker Hughes Inc., an oilfield services company. Companies have idled 519 machines the past 10 weeks, a 33 percent reduction, the data showed.

Rig Counts

The decline in rig counts isn’t enough to stop production growth, said Goldman Sachs Group Inc. Lower prices may be needed to balance the market because U.S. output could still expand by 600,000 barrels a day in the fourth quarter compared with a year earlier, the bank said in a note on Monday.

The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Permian and Eagle Ford in Texas and the Bakken in North Dakota. Production averaged 9.23 million barrels a day through Feb. 6, the most in weekly Energy Information Administration records dating back to January 1983.

Brent has technical resistance at $61.83 a barrel, according to data compiled by Bloomberg. That’s the 23.6 percent Fibonacci retracement of the decrease from a nine-month intraday high of $115.71 in June to January’s low of $45.19. Sell orders tend to be clustered around chart-resistance levels.

bloomberg.com

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