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SINGAPORE (Reuters) – Oil prices climbed on Monday as US drilling for new production stagnated and the market monitored conditions once Washington's sanctions against Iranian crude exports began in November.
FILE PHOTO: A tanker is seen at sunset anchored at the oil center of Fos-Lavera, near Marseille, France, October 5, 2017. REUTERS / Jean-Paul Pelissier / Photo file
West Texas Intermediate (WTI) futures were at $ 68.19 per barrel at 0344 GMT, up 44 cents or 0.65% from their latest settlement.
The price of Brent futures climbed 50 cents, or 0.65%, to $ 77.33 a barrel.
US energy companies cut off two oil rigs last week, bringing the total to 860, energy services firm Baker Hughes said Friday.
The number of rigs in the United States has stagnated since May, after a recovery since 2016, which followed a sharp decline the previous year as crude prices were plummeting.
Outside the United States, new US sanctions against Iranian crude exports from November contributed to higher prices.
Energy consulting firm FGE said several major Iranian customers, such as India, Japan and South Korea, were already reducing Iran's crude.
"Governments can talk hard. They can say that they will resist Trump and / or lobby for derogations. But in general, the companies we're talking about … say they will not take it, said FGE.
"US financial penalties and the loss of marine insurance frightens everyone," the group said in a note to customers.
The number of US platforms has stagnated since May: tmsnrt.rs/2NsKwpc
BETTER PROSPECTS?
With the stagnation of the activity of US platforms and the imminence of Iranian sanctions, the outlook for the oil market is tightening.
"Investors have become largely positive again … probably welcoming the return of the backlog," said Edward Bell, commodity analyst at Emirates NBD Bank.
Backwardation describes a market where prices for an immediate delivery are higher than those for subsequent delivery. It is considered a sign of strict conditions that encourage traders to sell oil immediately instead of storing it.
The Brent backlog between October of this year and mid-2019 is currently around $ 2.20 per barrel. <0#LCO:>
While Washington is pressuring other countries to line up and reduce their imports from Iran, it is also urging other major producers to increase their production so as not to create a price spike that is too high .
US Secretary of Energy Rick Perry will meet with his counterparts from Saudi Arabia and Russia on Monday and Thursday, respectively, as the Trump administration seeks the world's largest exporter and producer to maintain production.
One of the key issues ahead is how demand is growing in the US-China trade dispute, as well as the general weakness of emerging markets.
Asian stocks started the week in the red on Monday, weakening for the eighth consecutive day as US President Donald Trump further threatened import rights over Chinese products.
FGE Council warned that "trade wars, and especially rising interest rates, can create difficulties for emerging markets that stimulate demand growth (oil)."
Despite this, FGE said the likelihood of a significant drop in oil prices was relatively low, as the Organization of Petroleum Exporting Countries (OPEC) would hold back production to prevent falling prices.
"We consider that $ 65 per barrel is a trigger for cuts," said FGE.
Crude production in Russia, the United States and Saudi Arabia: tmsnrt.rs/2NqbrBZ
Report by Henning Gloystein; Edited by Joseph Radford and Richard Pullin
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