Monday saw a continuing increase in oil prices during first half of the session, as the European benchmark Brent crude oil reached a level of $67 a barrel. Nevertheless, bulls felt satisfied with the rally and took profit after noon as ample supplies still limit further gains.
Friday saw report of Baker Hughes Inc., an oil services company, informing about the number of U.S. active rigs and stating a decline for a record 21 weeks in a row. Such information provided an additional boost for bulls on the market, reborn after 2014 slump in oil prices due high supplies amid lagging global demand.
During previous year we could see lifted US oil production while the Organisation of the Petroleum Exporting Countries (OPEC) did not want to react with cut of their output, as well as Russia. Such competition on oil market provided a strong bearish impulse and both West Texas Intermediate and Brent crude dropped to approximately 40% of their previous levels in couple of months.
Now the supply is being cut somewhat, but we should need further cuts to bring the price back to previous levels. Nevertheless, it is hard to imagine that consumers would like to see oil prices to get back to previous levels again, mostly during economic problems in most of the countries.
Even recovery in Libyan exports could pull back bullish rally if the country could stabilize the situation.
From fundamental point of view, we do not see actual number of oil rigs closed to be enough, but if there are more countries lowering their production, we could see prices to reach above $70 level on WTI crude oil.
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