Oil could struggle on a surge in US oil rigs countering report of OPEC - Non-OPEC long-term alliance
- US oil rigs surged to almost 800 in the last week.
- Oil may come under pressure on a bounce back in USD.
WTI Crude Oil is now trading around $61.65, in New York session, rising by almost 0.50% and well off Thursday’s low of 59.71 on reports of OPEC-NOPEC long-term alliance and “risk-on” reflation sentiment. Earlier, oil reached the multi-week low of 58.19 on a renewed concern about higher US shale oil production and rising inventories despite a weak USD and Saudi jawboning about an OPEC commitment for the production cut agreement.
But, oil might come under pressure in the days ahead on the renewed concern of higher US shale oil production. As par, today’s Baker Hughes data, the weekly US oil rig count came at 798 against 791 prior. On the broader picture, US oil rigs have jumped from 747 to 798 in the last four weeks since 19th January. This shows that US drilling has really picked up, taking advantage of higher oil prices.
As per this week’s EIA data, US crude output hit a record 10.27 mbpd making it a larger producer than Saudi Arabia, just behind Russia; US crude and gasoline inventories also rose last week.
Also, the current recovery in the USD may be bad for Oil, especially if dollar bounce back continues from its 15 months low
Technically, Oil now has to sustain over $62.15 for a further rally towards the $62.80-$63.05 area and the $63.55-$64.85 zone in the coming days; otherwise, it may again fall to 61.00-58.00 area again.