WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures rebounded at the start of the new trading week following Friday's selloff, boosted by ongoing cuts from Organization of the Petroleum Exporting Countries, while U.S. oil rigs plunged to a 10-month low, according to industry data.
In midmorning trade, Nymex West Texas Intermediate April futures shifted $1.05 higher to near $56.85 barrels (bbl), while ICE May Brent futures rose $1.10 to trade at $66.17 bbl. Nymex ULSD April futures gained 3.24 cents at $2.0334 gallon, and the RBOB April delivery contract rallied 2.87 cents to $1.7590 a gallon.
Oil futures are finding support from the falling number of oil rigs deployed in the United States, as reported by Baker Hughes Friday afternoon. According to the industry data, U.S. oil rigs declined by 10 last week to stand at 843, the lowest number since May 2018, pointing to financial distress in the sector. According to Rystad Energy, U.S. shale industry has relied heavily on debt to finance its growth and now struggles to pay dividends while reducing debt simultaneously.
Despite the sliding rig count, Energy Information Agency reported last week U.S. oil output is at a record high of 12.1 million barrels per day (bpd), with crude imports plunging to 23-year low. Speaking at the International Petroleum Week in London, BP CEO Bob Dudley said U.S. shale is a market without a brain, which responds purely to price signals.
Unlike U.S. shale producers, OPEC members have deliberately reduced crude oil production, the chief catalyst in pushing crude prices up by more than 20% since the start of the year.
According to a monthly survey from Reuters, OPEC's output dropped to 30.68 million bpd in February, the lowest level since 2015. A Bloomberg survey shows a sharp drop in OPEC's output by 60,000 bpd to 30.5 million bpd in February.
The steep rate of the production decline comes as OPEC achieved 101% compliance with an agreement reached in Vienna in December with Russia and other non-OPEC oil producers to remove 1.2 million bpd of crude from the global oil market.
In U.S.-China news, the Wall Street Journal reported that both countries are in the final stages of completing a trade deal, with Beijing offering to lower tariffs on U.S. farm, chemical and auto products, while Washington is considering to remove most sanctions levied against Chinese imports since last year. According to the report, the agreement is taking shape after several rounds of trade talks in Beijing and Washington over the past several weeks. U.S. President Donald Trump is expected to meet with Chinese President Xi Jinping in March to forge a final agreement.
Liubov Georges can be reached at firstname.lastname@example.org
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