WASHINGTON (DTN) -- After trading on either side of unchanged for most of the session, oil futures on New York Mercantile Exchange and Brent crude on Intercontinental Exchange pushed higher in market-on-close trade Friday. The gains came after industry data reported the number of active oil and gas rigs in the United States fell to an all-time low this week in a sign domestic producers cut output faster than previously forecast.
Baker Hughes data revealed domestic oil and gas producers decommissioned 34 rigs during the week ended Friday, May 8, bringing the total number of rigs below 400 for the first time since at least 1940s. The number of U.S. rigs drilling for oil fell for the eighth consecutive week through Friday, May 8, dropping to the lowest level since September 2009 at 292.
Some in the market now see commercially-driven cuts in the United States outpacing those from the members of the Organization of the Petroleum Exporting Countries and Russia. Energy Ministry of Russia forecasts production shut-ins in the United States could reach 2 million to 3 million barrels per day (bpd) this year due to the lack of available storage and laggard demand. Reuters analysts estimate oil companies in North America are currently on track to withdraw about 1.7 million bpd of output by the end of June.
"When prices went negative, it really accelerated some of the cuts," Allyson Cutright, director at Rapidan Energy Group, told Reuters.
In addition to commercially-driven cuts in North America, members of OPEC-plus coalition began to implement their 9.7 million bpd supply-cutting agreement on May 1, aiding a nearly 50% price recovery in less than two weeks.
On Friday, NYMEX June West Texas Intermediate clawed back $1.19 to $24.74 per barrel (bbl), while gaining about 24% in value this week. The international crude benchmark Brent contract for July delivery advanced $1.51 to end the session at $30.97 bbl and up 16.6% on the week. NYMEX June ULSD futures rallied 6.22 cents to close at $0.8993 gallon, the highest settlement on the spot continuous chart since April 17. NYMEX June RBOB contact moved up 2.08 cents to $0.9522 gallon, while gaining over 24% on the week.
Oil prices were also lent support this week by early signs of demand recovery in the United States and elsewhere as major economies began taking first steps toward gradual reopenings. Demand for motor gasoline in the United States jumped 804,000 bpd or 14% to 6.664 million bpd during the week-ended May 1, a six-week high yet down 32.5% from the same week a year ago. Some analysts, however, caution "the relief rally" is bound to fizzle out in the coming weeks as economic recovery is still fragile and far from certain.
Underlining this sentiment employment data in the United States showed 20.5 million jobs were lost in April, with the unemployment rate jumping to a record-breaking high 14.7%. In early March, that figure was just under 3.5%, a 50-year low, before "stay at home" directives were issued across most U.S. states.
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