Plateauing U.S. output caused oil prices to see a 2 percent gain on Monday, continuing the longest streak of daily price gains after Baker Hughes reported the first decline in active U.S. rigs in 24 weeks.
Brent prices were up $0.64 or 1.31 percent at the time of this article’s writing. West Texas Intermediate barrels stood $0.75, or 1.63 percent higher, as well.
"It’s all about market sentiment," Commerzbank analyst Carsten Fritsch told Yahoo Finance. U.S. Gulf of Mexico producers saw a 100,000 barrel per day production from tropical storms and maintenance over the past two weeks, spurring eight straight days of price gains. "These... (temporary) factors outweigh the sharp increase in OPEC oil production in June... and the continued increase in Libyan and Nigerian output at least at the moment," he added.
Analysts note that the boom in active rigs in the Permian and Bakken is nearing an end, as the added production worsens the glut and puts downward pressure on already bearish prices. This makes new shale output more difficult to actualize.
"In our view there is still a significant shortfall in onshore output relative to prior market expectations," Standard Chartered wrote in a note on Monday. "We think the fall in prices has caused U.S. output growth to slow, and that revisions for May and June will confirm that supply is growing at a significantly more modest rate than the market has believed up to now."
OPEC oil output reached a 2017 high in June as Libya and Nigeria continue a production recovery despite the bloc’s efforts to ease a global supply glut, the results of a new Reuters survey shows. Saudi Arabia and Kuwait have shouldered most of the cuts to ensure the bloc sticks to its commitment to reduce production by 1.2 million barrels per day. Compliance to the deal will remain in the 90-95 range, despite the production increase this month.
By Zainab Calcuttawala for Oilprice.com
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