Oil advanced to the highest level in two months in New York as U.S. drillers cut the number of active rigs to the least in more than six years amid a global glut.
Futures rose as much as 2.2 percent in New York and climbed toward $40 a barrel in London. Rigs targeting oil fell by 8 to 392, declining for an 11th week to the lowest level since December 2009, according to Baker Hughes Inc. Hedge funds unwound bearish bets at the fastest pace in 10 months, U.S. Commodity Futures Trading Commission data showed, as the prospect of prices sinking to $20 receded.
Oil on Friday completed a third week of gains, the longest run since May, as U.S. crude production slid to the lowest since November 2014. Still, the nation’s stockpiles are the largest in more than eight decades and continue growing. A meeting among major producers to discuss freezing output may be held in Russia, Doha or Vienna in the March 20 to April 1 period, Russian Energy Minister Alexander Novak said on state television.
“Investors and traders have been eagerly awaiting their chance to ride the ever-impending oil market rally,” analysts at Barclays Plc including Miswin Mahesh in London said in a report. “Announcements of a second year of massive upstream capex cuts and talks of an output freeze among certain OPEC and non-OPEC countries seem to have provided support to sentiment.”
Short Positions
West Texas Intermediate for April delivery added as much as 80 cents to $36.72 a barrel on the New York Mercantile Exchange, the highest since Jan. 5, and was at $36.37 at 1:06 p.m. London time. The contract climbed $1.35 to $35.92 on Friday, capping a 9.6 percent advance for the week. Total volume traded was in line with the 100-day average.
Brent for May settlement increased as much as 78 cents, or 2 percent, to $39.50 a barrel on the London-based ICE Futures Europe exchange. The grade gained for a sixth day, the longest rally since the period to Nov. 25. The global benchmark crude was at a premium of 98 cents to WTI for May.
Speculators reduced their short positions in WTI crude by 15 percent, or 25,639 futures and options contracts combined, to 150,718 in the week ended March 1, the biggest decline since April 21, according to CFTC data. The exodus of bearish bets resulted in a 24,886-contract jump in the net-long position.
U.S. production dropped for a sixth week to 9.08 million barrels a day, according to Energy Information Administration data. Stockpiles are at 518 million barrels, the most since 1930.
“The market crowd lost its interest in the supply glut, although oil inventories continued to build in recent weeks, and instead focused on the early signs of declining U.S. oil production,” Norbert Ruecker, head of commodity research at Julius Baer Group Ltd., said in an e-mailed note.
Latest on the oil freeze agreement:
* Azerbaijan would join producers in freezing production, ANS TV reports, citing Rovnaq Abdullayev, president of state-run Socar.
* Current oil prices are forcing all producers to freeze output and there will be a price correction by year-end, United Arab Emirates Energy Minister Suhail Al Mazrouei told reporters in Abu Dhabi.
* Saudi Arabia, Russia, Qatar and Venezuela agreed last month they would freeze output, if other producers followed suit, in an effort to tackle a global oversupply in the oil market.
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