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Oil prices rebound after drop in US rig count

AFP
OPEC has cut its forecast for oil production by non-members of the group, notably in the Americas

Oil prices reversed losses Friday after a tumble in US drilling raised hopes of lower production to ease the global oversupply, outweighing a badly disappointing US jobs report.

US benchmark West Texas Intermediate for delivery in November delivery rose 80 cents to $45.54 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for November, the global benchmark, closed at $48.13 a barrel in London, up 44 cents from Thursday's settlement.

Oil prices had not benefited earlier from the drop in the dollar after an unexpectedly bleak US September jobs report.

Typically, a weaker US currency makes dollar-priced crude oil more attractive to buyers, boosting demand.

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But the jobs data suggested the US economy was being impacted by the China-driven global slowdown and market volatility, adding to worries about softer oil demand growth amid the long-running glut.

The market, which had been trading lower after the jobs data, reversed losses on news that explorers in the US had sharply cut back on drilling.

The closely watched Baker Hughes US oil rig count fell by 26 to 614 rigs this week.

"We saw the oil market turn around on that news," said Andy Lipow of Lipow Oil Associates, calling it a "significant decline" in the production indicator.

"The market expects that oil production will continue to decline and as a result demand will eventually catch up with the oversupply situation."

But for the months ahead, the outlook was bearish.

"We're going to remain under pressure for quite some time, particularly in the next six months as refiners are entering maintenance season and demand declines," Lipow said.

The disappointing US jobs report only added to the uncertainty hanging over the market.

Fawad Razaqzada, analyst at trading group Gain Capital, said that "investors are clearly now worried about weakening economic growth."

"With China already struggling and growth remaining lackluster in Europe, future demand for oil may not be as strong as had been previously anticipated," he told AFP.