Oil extended the longest run of gains this year, closing above $47 a barrel, as U.S. drilling slowed after a record expansion.

West Texas Intermediate futures rose as much as 2.3 percent in New York, adding to an 8.3 percent gain the previous seven sessions. Meanwhile, Brent, the global benchmark, is posting the longest rally since 2012. The increases come as U.S. drillers targeting crude cut the number of active rigs for the first time in 24 weeks. Before that, the count had climbed to the highest level since April 2015, according to Baker Hughes Inc. data on Friday.

"A surprise fall in U.S. production in April and oil rigs last week may ease concerns that U.S. crude production is ramping up too aggressively," Giovanni Staunovo, an analyst at UBS Group AG, wrote in a research note. "OPEC compliance and lower U.S. oil inventories could prompt higher oil prices in the coming weeks."

While prices surged last week, oil in New York and London still posted a monthly loss in June after tumbling into a bear market on concerns that rising global supply will counter cuts from the Organization of Petroleum Exporting Countries and its partners.

WTI for August delivery advanced $1.03 to settle at $47.07 a barrel on the New York Mercantile Exchange. The contract gained $1.11 to $46.04 on Friday to the highest since June 13.

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Brent for September settlement closed 91 cents higher at $49684 a barrel on the London-based ICE Futures Europe exchange. Front-month prices gained 5.2 percent last week. The global benchmark crude traded at a premium of $2.61 to September WTI.

OPEC member Libya, meanwhile, is adding more oil to the market as it restarts fields that are exempt from the group’s production curbs. The country’s output climbed to more than 1 million barrels a day for the first time in four years, according to a person with direct knowledge of the situation. State National Oil Corp. Chairman Mustafa Sanalla said in April he wanted to boost national output to 1.1 million barrels a day by August.

In the U.S., drillers reduced the number of rigs by two to 756, snapping the longest stretch of gains in at least three decades, according to Baker Hughes.

“A further pillar of price support came as the relentless surge in U.S. drilling activity took a break,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. It “suggests some producers are starting to feel the pinch from the recent slide in prices.”

Oil-market news:

Hedge fund wagers on lower WTI prices in the week through June 27 increased at a slower pace than the two previous weeks, according to data from the Commodity Futures Trading Commission. Money managers also extended their short positions on Brent crude before prices rebounded last week.

A Saudi-led coalition that has cut air, sea and land links with Qatar over accusations the country is supporting terrorism agreed to a two-day extension of its deadline for Qatar to meet its demands, the state-run Saudi Press Agency reported.

OPEC’s crude output rose 210,000 barrels a day in June to 32.54 million as Libya, Angola and Saudi Arabia pumped more, said JBC Energy.

Goldman Sachs Group Inc. is reviewing its commodities business after a slump in the first half of the year, according to people with knowledge of the matter.

Iraq sees no need for deeper production cuts for now and will keep investing to raise its capacity to 5 million barrels a day by year-end even if prices fall, Oil Minister Jabbar Al-Luaibi said at a conference in London

Source:
courtesy of BLOOMBERG

by Meenal Vamburkar and Ben Sharples

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