Oil holds above November lows but under threat from US supply
LONDON (Reuters) — Oil edged up for a third straight session on Monday, climbing off last week's seven-month lows but with gains capped by the relentless rise in US supply and bloated global inventories.
Investors in US crude futures and options increased their bets against a further rise in prices, as the number of US oil rigs in operation hit its highest in over 3 yr.
US shale oil output is up around 10% since last year, while places like Brazil have also hiked output.
The rise in supplies threatens to scupper efforts by the Organization of the Petroleum Exporting Countries and its partners to reduce global oil inventories with production cuts.
Brent crude futures were up 11 cents at $46.65/bbl by 1133 GMT, on track for a near 20% drop in the first half of the year. It hit a trough of $44.35 on June 21, its lowest level since November.
US West Texas Intermediate crude futures were up 17 cents at $43.18/bbl.
"We saw this continued big rise in oil rigs last week and in our view we don’t need a single additional rig for the next 12 months in the US space if we look at balance for 2018," SEB strategist Bjarne Schieldrop said.
"I don’t think OPEC is going to cut deeper, at least not for now. I think it’s keeping its fingers crossed and looking forward to Q3 and Q4 and hoping their medicine will do the trick," he added.
OPEC states and 11 other exporters agreed in May to extend cuts of 1.8 MMbpd until March 2018, in the hope that it would force global supply and demand to align.
Traders and analysts said there was little fundamental news to justify more of a bounce in oil prices.
"It is just the fact that the oil market stopped falling ... I suspect short-covering," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
Analysts at Bank of America-Merrill Lynch said demand had not grown quickly enough to mop up any excess output.
"Looking into the second half of 2017, we now doubt that demand growth will accelerate sufficiently," they wrote.
Reporting by Amanda Cooper; Additional reporting by Jane Chung in Seoul; Editing by Dale Hudson and Edmund Blair
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