Daily outlook for crude oil prices

Quotes from Commerzbank Corporates & Markets:

-Brent - measured against the front-month futures contract - climbed above the $60 per barrel mark on Friday for the first time this year: at a good $62 per barrel it was at its highest price in nearly two months. Clearly the expectation of a massive slowdown in US oil production growth is responsible for the dramatic price surge - the price has soared by 37% from its mid-January low.

-This view is supported by a slowdown in oil and natural gas drilling activity in the US, as can be seen from the corresponding statistics released by Baker Hughes. They show that the oil rig count in the US declined by a further 84 last week, putting the count at just 1,056. This was the tenth consecutive weekly decline and the second-sharpest since the data series began in 1987.

-The last time the oil rig count was as low as it is at present was in August 2011, the number having plunged by around 30% since the start of the year alone. It comes as no great surprise that the market is basing its views on this series of data: for one thing, the oil rig count is an easy figure to understand, and for another thing it can probably be seen as a reliable long-term indicator of future oil production.

-We see the latest price rise as speculative, premature and unsustainable. In our opinion, a premature price increase could slow the necessary process of market "adjustment" and closure of production capacities in North America. This would probably also call into question any sustained price rise to above $70 per barrel by year-end.