Prices of crude oil slumped for a second trading session on Monday, plunging more than 1 percent from last week’s 2016 peaks on worries over a supply glut after the United States rig count climbed for the first time since December.
Data from industry firm Baker Hughes showed that United States energy companies last week increased one oil rig after 12 weeks of slashes. Moreover, coming after oil rigs had dropped by two thirds over the past year to 2009 level of lows, indicated the decline in crude drilling stabilizing after a 50 percent surge since February.
On the New York Mercantile Exchange, crude oil for April delivery sank 80 cents or 2.03 percent to $38.64 per barrel. On Friday, the market inched up to $41.20 per barrel, which is its highest level since December, before losing ground to dip nearly 2 percent at $39.44 per barrel.
In the week ahead, investors will be shifting their focus on Friday’s final reading on United States fourth quarter gross domestic product (GDP) for new signs on the health of the economy.
Market players will also keep a close eye on reports on United States durable goods orders and home sales, as investors attempt to measure if the world’s biggest economy is capable of handling more rate hikes this year.
On the ICE Futures Exchange in London, internationally traded Brent crude for May delivery shaved 34 cents or 0.82 percent, on Friday to end the week at $41.20 per barrel, after rising to a peak of $42.54, the highest level since December 7.
Brent futures inched higher by approximately 40 percent, since momentarily sliding below a $30 per barrel on February 11. Short covering started in February after Saudi Arabia and other OPEC producers Qatar and Venezuela agreed with non-OPEC producer Russia to keep production at January levels if other exporters cooperated.
Qatari Oil Minister Mohammed Bin Saleh Al-Sada said that OPEC and non-OPEC producers will meet in Doha, Qatar on April 17 to tackle about their plans on an output freeze.
Venezuela’s oil minister also noted that the plan was supported by nearly 20 OPEC and non-OPEC members, accounting about 73 percent of global oil production.
According to an energy analyst, “The rebound in crude oil prices in the last month appears to have stabilized the number of rigs at work in the U.S. shale sector. After falling for six consecutive months, Baker Hughes data showed U.S. oil rig counts increased by one to 387.”
Global supply glut in crude oil had dragged down prices from 2014 highs above $100 per barrel to 12 year downturns earlier this year, pulling Brent to around $27 and United States crude to about $26.
The decreasing oil output, smaller crude stockpile builds and jumping gasoline consumption in the United States supported the recovery.
Prices have also hiked over the last two months after the Organization of the Petroleum Exporting Countries proposed the idea of keeping production at January levels.
However, the market is waiting for more signals and indications regarding this strategy.
As stated by a market strategist, “Markets want to see a little more back up as to what is happening there. The fact is we havent heard anything after that ... but really it is Monday trading, maybe it will come up little bit later.”