Oil prices post steepest weekly gains in years

Oil prices have risen by a further 1% to $64 per barrel (Brent) and a good $56 per barrel (WTI) as the new week begins, after having already surged by just shy of 10% and nearly 8% respectively last week. These were the steepest percentage weekly gains in 5½ years and more than 4 years respectively. 

What is remarkable is that the prices increased despite reports of a larger (over) supply. Both the International Energy Agency and OPEC reported that OPEC oil production in March had climbed to 31 million barrels per day, thus exceeding the current call on OPEC by approx. 2 million barrels per day. 

Market participants, however, are currently choosing to focus more on the apparent (provisional) end to the shale oil boom in the US. On Friday evening, Baker Hughes reported the 19th consecutive weekly decline in the oil rig count. Oil rigs fell by an additional 26 to 734 last week, putting them at their lowest level since November 2010. The oil rig count has thus dropped by more than half since the beginning of the year. 

Money managers are jumping on the bandwagon and exacerbating the price rises with their purchases. According to the CFTC, speculative net long positions in WTI rose for the third week running in the week to 14 April. They soared by nearly 70% during this period, and at 238,600 contracts are at their highest level since the end of July 2014.