By Barani Krishnan
The $65 level for WTI seems to be on its way. But ahead of that, the oil rig count has to be supportive.
Crude futures rose again on Friday, heading for a sixth-straight week of gains, as threats of a wipeout in Libyan crude supply bolstered an already squeezed market.
New York-traded West Texas Intermediate crude was up 62 cents, or 1%, at $64.20 per barrel by 11:00 AM ET (15:00 GMT). It hit a session high of $64.65 earlier in a fresh attempt by long-oil hedge funds to reach the $65 target.
London-traded Brent, the global benchmark for oil, was up 66 cents, or 1%, at $71.49. It hit a November high of $71.78 on Wednesday.
For the week, both benchmarks were up nearly 2% each. Year to date, WTI was up 41%, while Brent rose 32%.
Traders and investors will be on the lookout for the weekly U.S. oil rig count due after 1:00 PM ET from industry firm Baker Hughes to ensure the number wouldn't be disruptive to the bullish underpinnings of the market.
Last week, Baker Hughes reported that rigs rose by 15, the first climb in seven weeks. Though the rig count itself is a lagging indicator, with additional production showing up with a five-to-six-week latency after new drilling is reported, it is an important gauge to market participants trying to determine if U.S. output is surging again. Just last week, the U.S. Energy Information Administration estimated in its weekly supply-demand report that production had reached a new high of 12.2 million barrels per day.
Some analysts also wondered if the Libyan conflict was being overplayed.
Reports on Friday suggested that renegade Libyan general Khalifa Haftar had vowed to wipe out the North African country's oil production if he gained control of the capital, Tripoli. But after an early blitzkrieg, the warlord's advances seem to have slowed.
"Crude oil production has not been affected so far and if we cannot reduce the Libyan risk to zero, we go into this weekend with a lower risk premium for Libya than a week ago," said Olivier Jakob at PetroMatrix in Zug, Switzerland.
Russian President Vladimir Putin's remarks this week that Moscow was against "uncontrollable oil price increases" was also a red flag to Jakob.
OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from Jan. 1 for six months. The producers are due to meet on June 25-26 to decide whether to extend the pact.
Kirill Dmitriev, the Russian sovereign wealth fund chief who engineered the cooperation with OPEC, indicated this week that he wanted Moscow to pump more, although the Saudis, who virtually run OPEC, would like the curbs to remain. Russia's breakeven price for oil is around $42 per barrel, while the Saudis need the market to be at around $84 to fund their national budget.
But Putin, who's Russia's ultimate dealmaker, said he wasn't decided yet on how Moscow's cooperation with OPEC should go.
Putin aside, U.S. President Donald Trump is also against high oil prices, which he fears will hurt his 2020 reelection campaign.
"We tend to focus on Trump’s reaction to gasoline prices, but the Russian government is also continuously worried about the street discontent factor that comes with rising gasoline prices," Jakob said.
"We think that the Russian comments of this week are a sign that we are starting to approach this zone of divergence of interest (with Saudi Arabia), which will make it difficult to maintain the OPEC+ agreement above current prices."
