Oil rebounded from the biggest drop in a week amid signs that prices near a 5 1/2-year low are slowing drilling in the U.S., the fastest-growing producer.
Futures rose as much as 1.4 percent in New York, retracing some of yesterday’s 4.7 percent slide. BHP Billiton Ltd., the largest overseas investor in U.S. shale, said it will cut the number of active drill rigs in the nation by nearly 40 percent. Prices have probably reached their bottom, Iraqi Oil Minister Adel Abdul-Mahdi said in Kuwait today.
Oil fell almost 50 percent last year, the most since the 2008 financial crisis, as the U.S. pumped crude at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to reduce supply.
“Slower drilling is visible,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. “We have already seen the trend through the weekly rig counts.”
West Texas Intermediate for March delivery gained as
much as 66 cents to $47.13 a barrel in electronic trading on the New York Mercantile Exchange and was at $46.93 at 9:44 a.m. London time. The February contract expired on Jan. 20 after falling $2.30 to $46.39.
Brent for March settlement climbed as much as 79 cents, or 1.7 percent, to $48.78 a barrel on the London-based ICE Futures Europe exchange. It slid 85 cents to $47.99 on Jan. 20. The European benchmark crude traded at a premium of $1.64 to WTI.
Rig Cuts
BHP Billiton will reduce the number of operating rigs to 16 from 26 by July, the Melbourne-based company said in a statement. Drillers have cut the number of rigs in service by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. began tracking the data in July 1987.Crude’s slump isn’t justified by long-term economic fundamentals, Iraqi Oil Minister Adel Abdul Mahdi said at a conference in Kuwait City. The price plunge means Iraq must try to raise output, Iraq’s Deputy Prime Minister Rowsch Nuri Shaways said at the World Economic Forum in Davos, Switzerland.
Current prices should slow U.S. production growth in the second half of 2014 and Canadian output after two years, Daniel Yergin, the vice chairman of IHS Inc., a consultant in Englewood, Colorado, said in an interview on Jan. 20 at the WEF in Davos.
Volatility Climbs
The CBOE Crude Oil Volatility Index, which measures price fluctuations using options of the U.S. Oil Fund, climbed to 60.16, the highest intraday level since October 2011. Volume (USO) of the fund, the largest exchange-traded product tracking WTI futures, rose to 50 million shares on Jan. 15, more than double from the end of last year.Crude stockpiles in the U.S., the world’s biggest oil consumer, probably expanded by 2.4 million barrels to 390.2 million barrels in the week ended Jan. 16, a Bloomberg News survey shows before data from the Energy Information Administration tomorrow. Supplies in the prior period were more than 9 percent above the five-year average for this time of year, EIA data show.
The nation produced 9.19 million barrels a day through Jan. 9, the most in weekly records dating back to January 1983, said the Energy Department’s statistical arm. The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.
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