Oil prices were little changed on modest volume on Thursday, in a week in which crude benchmarks recouped more of March’s losses on increased hopes world supply and demand were nearing balance. It comes at the same time the U.S. oil rig count rose to its highest level in two years, threatening the rebalancing of markets.
Energy services firm Baker Hughes said on Thursday that drillers added 11 oil rigs in the week to April 13, bringing the total count up to 683. The number of U.S. rigs has increased for 13 consecutive weeks. The market has been oversupplied since mid-2014, prompting members of the Organization of the Petroleum Exporting Countries and some non-OPEC producers to agree to cut output in the first six months of 2017.
With the increasing rig count pointing to rising supply, Tony Headrick, energy market analyst at CHS Hedging, says OPEC will be watching.
“Ultimately OPEC is viewing it as a point of discussion in terms of whether or not they look to extend cuts,” Headrick says. OPEC meets on May 25 to consider extending the cuts beyond June. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers, OPEC sources told Reuters last month.
OPEC data showed members of the group had cut March output beyond the level they had promised. Benchmark Brent crude futures were down 12 cents at $55.74 a barrel as of 2:11 p.m. EDT (18:11 GMT), after touching a one-month high on Wednesday. U.S. West Texas Intermediate crude futures were down 4 cents at $53.07 a barrel. Both benchmarks are set for a third consecutive weekly gain.
The Paris-based International Energy Agency (IEA) said on Thursday that supply and demand in the global oil market were close to matching after a fall in stockpiles in developed countries in March.
The IEA said oil stocks in the Organisation for Economic Cooperation and Development industrialized countries fell by 17.2 million barrels in March, although inventories were still 300 million barrels above the five-year average.
“It can be argued confidently that the market is already very close to balance,” the agency said in its monthly report.
The IEA trimmed its oil demand growth forecast for 2017 by 40,000 barrels per day and warned that its revised level of 1.3 million barrels per day “could prove optimistic.”