Stock Market

U.S. crude surges to 2016 high, as rig count falls to lowest level ever

Investing.com – Investing.com — U.S. crude futures jumped to their highest level on the calendar year, extending their month-long rally from multi-year lows, as the domestic rig count last week fell to its lowest level on record.

On the New York Mercantile Exchange, WTI crude for April delivery traded in a broad range between $37.92 and $39.02 a barrel, before settling at 38.50, up 0.66 or 1.74% on the session. At session-highs, the front month contract for U.S. crude reached its highest level since early-December. Over the last month, WTI crude has soared more than 35%, rallying sharply from 13-year lows from mid-February.

On the Intercontinental Exchange (ICE), brent crude for May delivery wavered between $40.02 and $41.03 a barrel, before closing at 40.40, up 0.35 or 0.87% on the session. North Sea crude futures are also trading near 2-month highs after surging more than 27% over the last four weeks.

On Friday afternoon, oil services firm Baker Hughes said the total number of U.S. oil rigs fell by nine to 480 for the week ending on March 4. Previously, the lowest total on record came on April 23, 1999 when the rig count total dipped to 488. Separately, the total of active U.S. oil drilling rigs fell by six to 386, marking the 12th consecutive week of weekly declines.

Major reductions in the number of oil rigs nationwide typically provide lagging indications that production is about to level off. Last week, U.S. crude production ticked up by 1,000 barrels per day to 9.078 million bpd, halting a skid of six consecutive weekly declines. Last June, U.S. crude output hovered around 9.6 million bpd, its highest level in at least 40 years.

Crude prices have plummeted more than 50% since OPEC roiled global markets in November, 2014, with a strategic decision to maintain its production ceiling above 30 million barrels per day. The tactic triggered a prolonged battle with U.S. shale producers for market share, flooding global energy markets with excessive supply.

Elsewhere, crude received further upside support on Friday after the Paris-based International Energy Agency (IEA) provided indications that the prolonged rout in oil may have hit a bottom. In a monthly forecast, the IEA said that non-OPEC output would decline by 750,000 bpd in 2016, up from previous estimates of 600,000.

“There are clear signs that market forces…are working their magic and higher-cost producers are cutting output,” the IEA said in the report.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat in U.S. afternoon trading at 96.14, down 0.05% on the session. The index, which is down more than 2% over the last two months, fell to fresh three-and-a-half-week lows on Thursday.

Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.

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