Oil held gains after the biggest weekly advance in almost four years as signs of a drilling slowdown in the US bolstered speculation that companies are cutting back crude production amid a global glut.
Futures were little changed in New York after rising 7.2% last week. Drillers reduced the number of rigs in service by 83 to 1,140, the lowest level since December 2011, according to data from Baker Hughes Inc. Oil workers at two BP Plc plants in the Midwest joined the biggest strike at refineries across the nation since 1980 as negotiations on a new labor contract stalled.
Oil slid almost 50% last year as US producers pumped crude at the fastest pace in more than three decades.
The Organization of Petroleum Exporting Countries also resisted calls to cut supply, signaling it would fight to maintain market share. Venezuela wants OPEC to discuss steps to halt price fluctuations, according to Oil Minister Asdrubal Chavez.
“We’re seeing signs that the market is beginning to give greater weight in its pricing to the likelihood that shale oil production in the US will be cut over coming months,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said. “Whether the market can move past last week’s high of $54.24 for West Texas will probably be the next clue as to whether this dynamic can continue to push things higher.”
WTI for March delivery was at $51.82 a barrel in electronic trading on the New York Mercantile Exchange, up 13 cents, at 3:45 p.m. Singapore time. The contract climbed $1.21 to $51.69 on Feb. 6.
The volume of all futures traded was about 51% above the 100-day average.
Brent for March settlement was 15 cents lower at $57.65 a barrel on the London-based ICE Futures Europe exchange. It increased $1.23 to $57.80 on February 6. The European benchmark crude traded at a premium of $5.82 to WTI.
The total US rig count has shrunk by a record 435 in nine weeks, according to Baker Hughes. The drop of 37 at the Permian Basin, the nation’s largest oil field, was the steepest since the services company began reporting basin-by-basin counts in February 2011.
The lower rig count is “helpful” as a bigger share of the reduction was from more-productive horizontal facilities, Morgan Stanley said in an e-mailed report on February 9. The decrease “does not mean a steep decline in production is imminent” during the first half of this year, Barclays Plc said in a separate note.
The US 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.
United Steelworkers will resume talks on a national labor contract for 30,000 oil workers on February 10, said two people with knowledge of the negotiations. The union, which went on strike at nine sites on February 1, is representing employees of more than 200 refineries, fuel terminals, pipelines and chemical plants.
Royal Dutch Shell Plc, which made six offers previously, is bargaining on behalf of companies including Exxon Mobil Corp. and Chevron Corp. BP is operating its refineries in Whiting, Indiana and Toledo, Ohio with replacement workers, Scott Dean, a Houston-based company spokesman, said in an e-mailed statement.
OPEC alone can’t maintain “reasonable prices” and cooperation with producers outside of the group is necessary, Venezuela’s Chavez said in a statement.
Venezuela was among OPEC members that called for a production cut at their November 27 meeting. The 12-member group, which supplies about 40% of the world’s oil, decided to maintain its collective quota at 30 million barrels a day. Output averaged 30.9 million a day in January, exceeding the target for an eighth straight month, according to data compiled.
The CBOE Crude Oil Volatility Index, which measures price fluctuations using options of the US Oil Fund, closed as high as 63.14 last week, the most since April 2009.
In China, crude imports fell to 27.98 million metric tons in January, data from the Beijing-based General Administration of Customs showed on Sunday. That’s equivalent to 6.62 million barrels a day, down 7.9% from a record high of 7.19 million a day in December.
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