MW: Crude prices add to gains in an increasingly bullish market
Oil prices kicked off the week on the rise Monday on hopes that major producers will curtail supply and as better economic data fueled hopes of improving demand.
Brent crude LCOK6, +1.52% , the global oil benchmark, rose 1.7% to $39.36 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in April CLJ6, +1.70% traded at $36.57 a barrel, up $0.66, or 1.8%, in the Globex electronic session.
On Monday, the United Arab Emirates’ energy minister said that current prices are forcing all suppliers to freeze their production.
“It doesn’t make any sense for anyone to increase the production with the current prices,” Suhail al-Mazrouei told reporters on the sidelines of an aerospace conference in Abu Dhabi. “This is all good news for balancing the market. We just need to be patient.”
Opinion: Oil stocks’ latest big rally is no gusher
Oil prices have been climbing steadily in recent weeks after Russia, Saudi Arabia, Venezuela and Qatar agreed last month to freeze their output at January levels in an effort to support prices. Brent is up more than 5% so far this year.
However, their agreement was contingent on other Organization of the Petroleum Exporting Countries and non-OPEC members joining the plan and Iran quickly dismissed the notion.
“The big risk is that the meeting proves a disappointment and prices fall back sharply on any lack of further progress,” said Barclays analyst Kevin Norrish.
Still, oil has received support from other signs of falling supply. On Friday, industry group Baker Hughes reported that the number of rigs drilling for crude oil in the U.S. dropped by eight to 392, the lowest level since 2009. Rig counts are seen as a rough proxy for activity in the industry.
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Outlook for global oil demand is also improving. In February, U.S. job growth rebounded as nonfarm payrolls increased by 242,000 and gains in the prior two months were increased by 30,000, official data showed on Friday.
The improved U.S. jobs numbers are “increasing hopes that growth and hence oil demand in the huge country is picking up,” said Michael Poulsen, oil analyst at Global Risk Management.
This week, the market will be taking cues from China’s February trade data report set for release Tuesday and the weekly U.S. report on crude inventories and production to be issued Wednesday.
Nymex reformulated gasoline blendstock RBJ6, +0.70% —the benchmark gasoline contract—rose 1% to $1.35 a gallon. ICE gasoil changed hands at $352 a metric ton, up $10 from the previous settlement.
