According to Baker Hughes, the US rig count rose by only two to 765 in the week ending July 14, representing the slowest pace of growth since November last year.
The news enabled Brent Crude to approach $49 a barrel as traders began to see a possibility that the US shale boom may be running out of steam.
The news followed data from the previous week showing that US crude inventories dropped sharply in the week ending July 7. High crude stocks persisted in other industrialized nations, however, subduing the subsequent oil price rally.
The slowdown in the US rig count will help allay fears that surging US oil production, together with increased production from Libya and Nigeria, will undermine the OPEC-led production cuts. Many brokers are taking a wait-and-see approach, with a jump in demand anticipated in the second half of the year. One encouraging sign has been an increased crude throughput in Chinese refineries for June.
Oil broker PVM said:
“There is almost an agreement that the second half of the year should be tighter than the first half due to significant jumps in demand forecasts. The net result is a rise in the demand for OPEC oil.”
In other developments, Martijn Rats, an analyst at Morgan Stanley, has predicted that the recovery in big-oil earnings has most probably stalled in the second quarter, although he anticipates that Royal Dutch Shell, the producer of hydraulic oils like Shell Tellus S2 M 32, and BP will still do reasonably well.
