Oil rose after drilling activity in the U.S. eased, adding to signs the global crude surplus is abating.
West Texas Intermediate futures rose 0.5 percent, following a 1.7 percent increase last week, when they hit a three-year high. Rigs drilling for crude fell by five to 742 in the seven days ended Jan. 5, according to Baker Hughes data Friday. Hedge funds retreated from the most bullish stance on WTI in 10 months during the week ended Jan. 2.
“A drop in active oil rigs is usually bullish for oil prices,” said Michael Poulsen, an analyst at Global Risk Management Ltd.
Oil had its strongest opening week for any year since 2013 as U.S. stockpiles continue to shrink. While output curbs by the Organization of Petroleum Exporting Countries and its allies have driven up prices, it has also taken crude to a level where profits are high enough to encourage an expansion in shale production in America.
WTI for February delivery was at $61.74 a barrel on the New York Mercantile Exchange, up 30 cents, as of 10:42 a.m. in London. Total volume traded was about 2 percent above the 100-day average. Prices lost 57 cents to $61.44 on Friday.
Brent for March settlement rose 15 cents to $67.77 a barrel on the London-based ICE Futures Europe exchange. Front-month prices rose about 1.1 percent last week. The global benchmark crude traded at a premium of $6.06 to March WTI.
U.S. explorers spent the final six weeks of 2017 in a virtual standstill, adding just as many rigs as they laid off. Bowing to heightened investor pressure, drillers are seeking to do more with less in a bid to boost profits. Their money-saving moves include opening already-drilled wells by fracking them rather than deploying more rigs to start new ones.
“It is clear to see that the U.S. shale patch has a number of chinks in its armor,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.
Money managers cut their WTI net-long position — the difference between bets on a price increase and wagers on a drop — by 3.8 percent to 396,381 futures and options in the week ended Jan. 2, according to data from the U.S. Commodity Futures Trading Commission on Friday. Longs fell by 3.8 percent, and shorts decreased 4.3 percent.