Oil Rises Towards $59, Supported By U.S. Drilling Slowdown

Oil Rises Towards $59, Supported By U.S. Drilling Slowdown

On Monday Brent continued with gains that it had made late last week by rising to $59 a barrel amid fears that the prices might go high due to a slowdown in drilling in the U.S.

Also up were Front-month Brent crude futures LCOc1 which were up to $58.69 a barrel, a gain of 82 cents. Earlier in the day it had reached the $59.54 mark. The U.S. crude CLc1 also posted good results rising by 78cents to stand at $52.42 a barrel. Earlier in the day it had touched the $53.10 mark.

While speaking about the rise in oil prices, the head of community strategy at Saxo Bank, Ole Hansen said that, "We found a bit of a momentum this morning."

"The U.S. rig count once again focused people's minds on the imminent reduction of production. The market's choosing to not focus on the ample supply we have at the moment."

Between 0715 GMT and 0810 GMT on Monday oil prices increased more than a dollar due to the fact that traders were covering short positions, an analyst said.

Ken Hasegawa, the commodity sales manager at Newedge said that, "If the market rises a lot then a lot of short covers come into the market. It's the same when prices fall."

Although many believe that oil prices will not fall any further, many analysts do believe that a big rally is very unlikely.

A note issued out by ANZ stated that, "Although there are tentative signs of demand improving and rig counts fell to the lowest level since 2010, an ongoing global market surplus – driven by swelling U.S. inventories and Saudi Arabian output to record high levels – should limit any potential rally."

 

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