Crude oil futures were higher during mid-morning trade in Asia Monday on the back of a lower US rig count and lingering global supply concerns. At 10:10 am Singapore time (0210 GMT), new front-month December ICE Brent crude futures were up 31 cents/b (0.37%) from Friday’s settle at $83.04/b, while the NYMEX November light sweet crude contract was 22 cents/b (0.30%) higher at $73.47/b.
Baker Hughes data released Friday showed the US oil rig count fell by three to 863 in the week ended September 28. The decline, due in part to takeaway issues and budget constraints, comes despite strong incentives to produce more oil, analysts said. US oil production averaged 10.964 million b/d in July, breaking the record set the month before, when output averaged 10.695 million b/d, the Energy Information Administration said in its monthly production report Friday.
However, ongoing supply concerns ahead of the reimposition of US sanctions on Iran continue to provide price support, analysts said. “Market watchers remain fixated on potential supply shortages amid OPEC’s refusal to increase supply, though empirical supply prints over the same period did not reflect any severe supply shock,” OCBC commodity economist Barnabas Gan said. With countries including South Korea and India reducing their imports of Iranian crude, expectations of a shortage of supply come November, when the sanctions come into effect, are pushing prices up, analysts said.
“Market focus is on how much an OPEC production increase will compensate for the supply losses due to Iranian sanctions,” ANZ analysts said in a note. Oil industry leaders walked away from the Asia Pacific Petroleum Conference in Singapore last week assured that crude’s bull run is here to stay for now, with many expecting crude prices to hit $100/b soon. Elsewhere, money managers added net length in NYMEX crude futures last week, Commodity Futures Trading Commission data showed Friday. Crude trading net length grew 6,884 contracts to 333,641 contracts over the week. “Investors continued to hold bullish bets in oil, adding more than 30,000 contracts in net long position,” ANZ analysts said.