Oil Futures Rise on Expectations of U.S. Production Drop
Prices have plunged in recent months amid growing oversupply of oil in global market
NICOLE FRIEDMAN and GEORGI KANTCHEV/WSJ
Updated April 13, 2015 10:42 a.m. ET
Oil prices rose for a third straight session on Monday on continued expectations that U.S. crude-oil production is set to slow.
Light, sweet crude for May delivery recently rose 90 cents, or 1.7%, to $52.54 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 85 cents, or 1.5%, to $58.72 a barrel on the ICE Futures Europe exchange.
Prices have plunged in recent months amid a growing oversupply of oil in the global market. Companies have responded to low prices with large spending cuts, but those have yet to translate into a drop in production.
The U.S. Energy Information Administration is due to release its drilling productivity report later Monday, which tracks production in seven key regions for shale oil and natural gas. Last month, the report forecast that crude-oil output in three of those regions would fall in April, and prices rose on the news, though overall oil output from the seven areas was expected to rise.
The updated report is expected around noon EDT.
Oil gained last week after a further drop in the number of rigs drilling for oil in the U.S. The count has declined for 18 straight weeks and is at a level last seen in December 2010, according to oil-field-services firm Baker Hughes Inc.
The fall in the number of oil rigs has fueled expectations that the surging growth in the country’s production would soon start to slow.
However, weekly EIA data continues to show production near multi-decade highs and inventories of crude oil at the highest level in more than 80 years.
Many analysts expect the second quarter to be the weakest of the year for prices, because refineries in Europe and Asia typically buy less crude at this time of year as they perform seasonal maintenance.
Money managers have added to their bets that oil prices will rise in recent weeks. “Very high investor interest is currently favoring oil prices,” Commerzbank said in a note. “We believe the optimism among investors vis-à-vis oil is exaggerated. This has given rise to considerable correction potential which could lead at any time to a sharp fall in prices.”
Gasoline futures recently rose 1.2% to $1.8280 a gallon. Diesel futures rose 1.9% to $1.80 a gallon.