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Oil edges up towards $49 a barrel

Slowdown in US land rigs increase eases concern of supplies dashing Opec-led cuts

Oil edged up to around $49 a barrel on Monday as a slowdown in the increase of rigs drilling in the US eased concern that surging shale supplies will undermine Opec-led cuts.

US drillers added two oil rigs in the week to 14 July, bringing the total to 765, Baker Hughes said on Friday. Rig additions over the past four weeks averaged five, the lowest since November.

"The slowing pace of increases combined with massive drawdowns last week on both official crude inventory numbers from the US probably explains the positive sentiment in general at the moment," said Jeffrey Halley at brokerage OANDA.

Oil ends week up 5%

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Brent crude, the global benchmark, was up 7 cents at $48.98 a barrel by 10:51am GMT. US crude traded at $46.55, up 1 cent.

Oil prices are less than half their mid-2014 level because of a persistent glut, even after Opec plus Russia and other non-members started a supply-cutting pact in January.

US crude oil inventories in the week to 7 July, the most recent, dropped the most in 10 months, raising expectations that a long-awaited market rebalancing is under way.

While the Opec-led cuts have offered prices some support, rising supplies from Nigeria and Libya, two Opec members exempt from the pact, have weighed on the market, as has growth in US shale production.

Kuwait said on Friday the market was on a recovery track due to rising demand and that it was premature to cap Nigerian and Libyan output. An Opec and non-Opec committee meets in Russia on 24 July to discuss the impact of the deal.

Demand signal a positive impetus

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In a sign of strong demand, data on Monday showed refineries in China increased crude throughput in June to the second highest on record. Opec is hoping higher demand in the second half will get rid of excess inventories.

"There is almost an agreement that the second half of the year should be tighter than the first half due to significant jumps in demand forecasts," oil broker PVM said. "The net result is a rise in the demand for Opec oil."

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