Crude oil prices were up on Monday based on expectations that oversupply would be trimmed on the global market with a decline in US crude output because the number of US oil rigs hit the lowest level since June 2009.
International benchmark Brent crude was trading at $43.20 per barrel at 0640 GMT for a 0.93% increase after closing Friday at $42.80 a barrel.
American benchmark West Texas Intermediate (WTI) was at $40.60 a barrel at the same time for a 0.79% gain after ending Friday at $40.28 per barrel.
The number of oil rigs in the US, an indicator of short-term production in the country, fell by 3 to 185 for the week ending July 2, according to oilfield services company Baker Hughes on Thursday.
While this marked the lowest level in the US oil rig count since June 2009, the number of operable rigs fell for the sixteenth consecutive week last week to post an overall decrease of 498.
The decline in oil rig count suggests that crude oil production in the US will decrease in the short-term, trimming some of the glut of supply in the market while bolstering prices.
On the demand side, however, the risk of a second wave of the novel coronavirus (COVID-19) continues to negatively impact the outlook for economic activities and oil consumption around the world.
John Hopkins University data revealed that the US, the world’s largest oil consumer, is also leading with the most number of coronavirus cases at 2,888,730 as of Sunday, with the states of Texas and Florida showing record numbers of new cases on Saturday.
As a second wave of COVID-19 is sure to keep global oil demand low, oil prices could remain low through the remainder of 2020.
If the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, fails to extend output cuts beyond July 31 when it expires, it will be unable to bring balance to the market.
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