Oil Hovers in Tight Trading Range Amid Global Supply Tug-of-War

(Bloomberg) -- Oil held above $53 a barrel, after spending last week in the smallest trading range in 13 years, as investors weighed rising U.S. drilling activity against OPEC production cuts.

Futures rose 0.3 percent in New York after fluctuating in the narrowest range since January 2004. U.S. drillers boosted the rig count to the highest since October 2015, Baker Hughes Inc. said on Friday. Meanwhile, hedge funds raised net-long positions on West Texas Intermediate to a record, according to Commodity Futures Trading Commission data.

Oil has held above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations started trimming supply on Jan. 1 to ease a global glut. While Goldman Sachs Group Inc. predicts the market will shift into deficit during the first half of this year, U.S. crude stockpiles have increased the past six weeks to the highest level in more than three decades.

“It’s a market that’s in an equilibrium phase and around about fair value given the outlook,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “Prices are being supported by reasonable prospects for demand growth and by the supply outlook, but any rally is capped by the potential for increased production levels, particularly from the U.S.”

WTI for March delivery, which expires Tuesday, was 16 cents higher at $53.56 a barrel on the New York Mercantile Exchange at 8 a.m. in London. Transactions on Monday will be booked Tuesday for settlement purposes because of the U.S. Presidents’ Day holiday. Total volume traded was about 38 percent below the 100-day average. The more-active April contract rose 17 cents to $53.95.

Rig Count

Brent for April settlement gained 19 cents to $56 a barrel on the London-based ICE Futures Europe exchange. Prices rose 16 cents to $55.81 on Friday. The global benchmark traded at a premium of $2.04 to April WTI.

See also: Shell shakes up oil trading world with brash Brent buying sprees

Rigs targeting crude in the U.S. increased by 6 to 597, according to data from Baker Hughes. Drillers have added 72 rigs this year. American oil production is near the highest level since April, according to government data.

Oil-market news:

• Hedge funds boosted their net-long position on WTI by 8.6 percent in the week ended Feb. 14, CFTC data show.

• China National Petroleum Corp. bought a stake in Abu Dhabi’s largest oil concession as the Middle Eastern emirate with 6 percent of global crude reserves looks to Asia for investment to raise output capacity.

To contact the reporters on this story: Ben Sharples in Hong Kong at bsharples@bloomberg.net, Perry Williams in Sydney at pwilliams113@bloomberg.net.

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Abhay Singh

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