By Georgi Kantchev
LONDON--Oil prices were trading down on Friday ahead of closely
watched U.S. oil drilling data.
Brent crude for July delivery recently fell 0.2% to $66.39 a
barrel on London's ICE Futures exchange. On the New York Mercantile
Exchange, light, sweet crude futures for delivery in July were
trading at $60.54 a barrel, down 0.3% from Thursday's
settlement.
Investors were focusing on the release of the latest U.S. oil
drilling rig count--a proxy for activity in the industry--later on
Friday by Baker Hughes Inc.
There are now about 59% fewer rigs working since a peak of 1,609
in October. The rate of decline, however, has slowed in recent
weeks and some shale oil companies are expecting to add rigs in the
coming months if prices stabilize near the current levels.
"The current price levels may keep some players in business and
even entice others to come back," analysts at JBC Energy said in a
report. "The first plays to rise from the dead and post further
growth could be in the U.S. and. such a turn of events could keep
production up and lengthen the global balance further even if
prices lose some of their luster."
Oil markets have rebounded in recent weeks to their highest
level so far this year on the back of expectations of a slowdown in
U.S. output, fresh unrest in the Middle East, signs of stronger
demand and a weaker U.S. dollar.
But Barclays warns that oil markets aren't out of the woods yet
and oil prices are still 42% below last year's peak levels.
"The rebound off of a low base has been considerable, but oil
prices are still well below the 2014 peaks and oil market
fundamentals are still weak," Keith Parker, an analyst at Barclays,
said.
According to JBC, while oil demand has so far been strong, the
global oversupply of crude is far from over and could see more
stock building well into next year. Record high oil exports from
OPEC members as well as a potential lifting of the Iranian
sanctions add to the weaker market outlook, JBC said.
"Putting these factors together, the summer relief hitting the
market will be very brief and with all the storage volumes kicking
around, there is little reason to get overly bullish. As a result,
we see Brent averaging $61 per barrel over the June-August period,"
JBC said.
Nymex reformulated gasoline blendstock for June--the benchmark
gasoline contract--fell 0.1% to $2.0820 a gallon, while ICE gas oil
for June changed hands at $605.50 a metric ton, down $3 from
Thursday's settlement.
Eric Yep contributed to this article
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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