07 March 2016, Lagos – Oil prices rallied further Monday, boosted by strong US jobs growth and as a cut in the country’s crude drilling activities sparked hopes of an easing supply glut, analysts said.
Recent dollar weakness helped also to lift demand for the commodity priced in the greenback, as did indications that producers were already making moves to limit output. US benchmark West Texas Intermediate (WTI) for delivery in April jumped $1.58 to trade at $37.50 a barrel around 1715 GMT. Brent North Sea crude for May delivery surged $1.73 to $40.45 a barrel compared with Friday’s close.
Brent earlier Monday hit a near three-month high at $40.68 a barrel and WTI reached a two-month peak at $37.68. Prices had rallied Friday on the back of sliding US production and after the US Labor Department reported that the world’s top economy added a robust 242,000 jobs in February. “There was a bit of a double-win.
On the one hand we had strong US jobs growth but on the other hand, we had lower wage growth and therefore, a weaker US dollar,” Ric Spooner, chief market analyst at CMC Markets in Australia, told AFP. “There’s an ongoing… momentum in commodity prices generally and oil is part of that,” he said Monday.
Bloomberg News reported that US drillers have slashed the number of active rigs to their lowest level in more than six years. However, analysts say that for an even greater gain for battered commodity prices there needs to be production cuts in the Organisation of the Petroleum Exporting Countries (OPEC).
“We’re a long way away from any production cut agreement. The market did react to the initial (announcement of) meetings but since then there hasn’t been much to give markets any encouragement,” Spooner said.
Saudi Arabia, Russia, Qatar and Venezuela last month agreed to freeze output if other producers followed suit. Emirati Oil Minister Suhail Mazrouei on Monday said that current market prices were already forcing most producers to freeze oil output levels, insisting it made “no sense” to pump more crude.
“Current prices are forcing everyone to freeze. So I think it is happening as we speak,” Mazrouei told reporters in Abu Dhabi. “It does not make any sense for anyone to increase production at current prices.”
Mazrouei said he was aware of talks on holding a meeting between OPEC and non-OPEC producers, but stressed that he had not received an invite. African oil kingpin Nigeria last week said that key crude producers planned to meet in Russia later this month to discuss the proposed output freeze. “The oil markets will continue to watch closely the negotiations with other OPEC producers, and economic data coming out of China and the eurozone,” said EY analyst Sanjeev Gupta.