Oil edged up to about $49 a barrel on Monday after fewer drilling rigs were added in the United States last week, helping ease concerns that surging shale supplies will undermine OPEC-led production cuts.
U.S. drillers added two oil rigs in the week to July 14, bringing the total to 765, Baker Hughes said on Friday. RIG-OL-USA-BHI Rig additions over the past four weeks averaged five, the slowest pace of growth since November.
A sharp drop in U.S. crude inventories in the week to July 7 supported prices last week. But crude stocks in industrialised nations remained high, putting a brake on the oil price rally.
“The market is not doing too much today – it feels like wait and see,” said Olivier Jakob of oil analyst Petromatrix. “There is some rebalancing in products, but overall the layers of stocks are still very large.”
Brent crude, the global benchmark, was up 8 cents at $48.99 a barrel by 1341 GMT. U.S. crude traded at $46.57, up 3 cents.
Oil prices are less than half their mid-2014 level because of a persistent glut, even after the Organization of the Petroleum Exporting Countries with Russia and other non-OPEC producers cut supplies since January.
While OPEC-led cuts have offered prices some support, rising supplies from Nigeria and Libya, two OPEC states exempt from the pact, and increasing U.S. production have weighed on the market.
Kuwait said on Friday the market was on a recovery track due to rising demand and said it was premature to cap Nigerian and Libyan output. An OPEC and non-OPEC committee meets in Russia on July 24 to discuss the impact of the deal.
In a sign of strong demand, data on Monday showed refineries in China increased crude throughput in June to the second highest on record. OPEC is hoping higher demand in the second half will get rid of excess inventories.
“There is almost an agreement that the second half of the year should be tighter than the first half due to significant jumps in demand forecasts,” oil broker PVM said. “The net result is a rise in the demand for OPEC oil.”