Crude oil prices extended gains in early Asia trade Monday as the market turned more bullish on expectations of smaller supply and growing demand.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $36.51 a barrel at 0210 GMT, up $0.59 in the Globex electronic session. May Brent crude on London’s ICE Futures exchange rose $0.64 to $ 39.36 a barrel.
Many analysts say that while the move will do little to abate the glut, it is still a step in the right direction and possibly opens the door for future concessions. According to Nigeria’s oil minister, officials from oil-producing nations will meet on March 20 in Moscow to discuss the details of the pact.
There have been other signs that low oil prices are weighing on production plans. Last week, the number of rigs drilling for crude in the U.S. dropped by eight to 392, to the lowest level since 2009, according to industry group Baker Hughes.
The combined number of oil and natural-gas rigs fell by 13 to 489, just above the record low of 488 rigs in 1999, the group said.
U.S. shale production has also ebbed from its peak level in April of last year, emphasizing the financial struggles seen across the energy sector.
Outlook for global oil demand is also brightening. In February, U.S. job growth rebounded as nonfarm payrolls increased by 242,000 and gains in the prior two months were revised up by 30,000. Increased employment can add to oil demand as more commuters drive to work.
Over the weekend, Premier Li Keqiang laid out China’s target economic growth should average at least 6.5% over the next five years. The country’s top economic-planning agency also ruled out any possibility of a hard landing and rebutted the claim that China’s slower growth is a drag on the global economy.
Investment group CLSA estimates China’s oil majors will cut domestic oil production by 4% to 5% in 2016 and a further 3% next year.
This week, the market will be taking cues from China’s February trade data report set for release Tuesday as well as the U.S.’s weekly report on crude inventories and production to be issued Wednesday.
Nymex reformulated gasoline blendstock for April–the benchmark gasoline contract–rose 152 points to $1.3473 a gallon, while April diesel traded at $1.1715, 102 points higher.
ICE gasoil for March changed hands at $346.00 a metric ton, up $9.25 from Friday’s settlement.
