Oil rises on U.S. rig count; market also up on week and month

Oil prices rose on Friday, finishing higher for the week and month as well, after another decline in the U.S. oil rig count indicated domestic crude production could fall in coming months.

Prices also got a boost from separate data showing U.S. oil output in August fell to third lowest figure this year.

Brent, the global benchmark for oil, settled up 76 cents, or 1.6 percent, at $49.56 a barrel. It rose 3 percent on the week and 2 percent for October.

U.S. crude futures rose by 53 cents, or 1.1 percent, to $46.56, gaining 3 percent on the week and 4 percent on the month.

Oil prices had trended higher since Wednesday’s 6 percent rally sparked by a smaller-than-anticipated build in U.S. crude and sharper-than-expected falls in gasoline and diesel stockpiles.

U.S. oil drillers removed 16 rigs in the week ended Oct. 30, bringing the total rig count down to 578, the least since June 2010, oil Services Company Baker Hughes Inc said in its closely followed report.

The drop was a sign that low prices were continuing to keep drillers away from the well pad, signaling lower production over the next several months.

But while U.S. output is declining, global supplies of crude and refined oil products continue to grow, testing storage capacity and hammering oil company results.

This is prompting oil bears to argue that price rallies such as Wednesday’s cannot be sustained.

“Looking at the bigger picture, there is still lots of oil in the United States,” PVM Oil Associates analyst Tamas Varga said. “We should see a softer market in the coming days.”

Others are not so sure.

“Although providing fundamental rationale for a 6 percent single day advance remains challenging, we are conceding to a significant improvement in the short term chart picture and a need to lift pricing in order to attract fresh selling,” said Jim Ritterbusch of Ritterbusch & Associates, an oil consultancy in Chicago.

A Reuter’s survey was supportive to the market, showing that Saudi Arabia and Iraq pumped less oil in October than African nations in OPEC, pushing the producer group’s output down from near record highs.

Chinese government data also showed the country was doubling crude oil import quotas for 2016.