The number of oil rigs operating in the US fell again last week as global prices rose for a sixth week after Saudi Arabia and Russia committed to continuing their production cuts into September.
Brent crude futures for October eased 10 cents, to $US86.15 a barrel at the close Friday, while US West Texas Intermediate crude for September eased 0.22%, to $US82.64 in after-hours dealings.
Both crudes were up more than 2% for the week, and the gains over the past six weeks are approaching 17% (and US petrol prices hit 9-month highs late last week).
The six weeks of gains are the longest so far in 2023.
The Saudi cut is about a million barrels a day, but Russia has sliced its reduction to just 300,000 barrels as it tries to maximise revenues from hard-nosed buyers like China and India.
According to data compiled by energy-services firm Baker Hughes, fewer oil rigs were again in use last week.
The oil count dropped to 525 from 529 the week before, while the tally for gas remained unchanged at 128. Miscellaneous rigs lost one to bring the count to six.
A year earlier, the US had 598 oil rigs, 161 gas rigs, and five miscellaneous rigs in operation.
Overall, there were 659 rigs operating in the US last week against 764 a year earlier.
According to a note from analysts at ANZ on Friday, “These supply cuts are finally tightening the oil market,” while the situation is being exacerbated by low supply growth in other regions, ANZ said. US shale oil output is likely to fall amid a decline in drilling activity.
US production is running at 12.2 million barrels a day, about steady on a year ago.
Even so, a sustained rally in prices will be dependent on a continued rebound in demand, which seems to be the case at least in the short term, ANZ wrote.
Over the medium term, however, red flags such as electric vehicle growth in China could “cap this upside” in prices, it said. Chinese sales of new energy vehicles will go close to topping 8 million in 2023.
The OPEC+ group agreed on a broad deal to limit supply into 2024 at its last policy meeting in June, and at that time, Saudi Arabia pledged to voluntarily cut more production for July and then extended it to August. Now it’s extended to September and the end of the third quarter.
After the Saudi Arabian decision, White House national security spokesman John Kirby said the United States will continue to work with producers and consumers to ensure the energy market promotes growth. The US is still the world’s biggest oil producer.
Both OPEC and the Paris-based International Energy Agency are forecasting a pickup in oil demand that could lead to supply tightness in the second half of 2023.
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Meanwhile, Comex gold futures ended with a gain on Friday and last week of around 1%.
The front month ended up at $US1,978.20 at the close on Friday, adding ground in after-hours trading from the earlier settlement of $US1,976.10 an ounce.
Comex gold topped $US2,000 an ounce on Monday but couldn’t go on with the surge, and the price dipped.
Gold failed to react positively to Tuesday’s move by Fitch to cut America’s credit rating to AA+ from AAA. That was a significant non-reaction from traders in the metal.