Oil price rises towards $70 on reduced U.S. drilling activity

Oil price rises towards $70 on reduced U.S. drilling activity

Futures in NY were little changed after surging 3.2% on Friday, the most since July 25.

U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to a record 6.95 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday. Some is related to position-squaring ahead of today's US consumer inflation report, which could also impact the dollar and future demand for crude oil.

"Oil prices fell on the back of concerns that surging US production. could push inventories in the USA higher", ANZ bank said on Tuesday. The dollar tends to have an inverse relationship with oil prices, as a weaker greenback makes dollar-denominated commodities cheaper for holders of other currencies. The US benchmark gained $1.92 to $62.04 on Friday.

WTI settled down 68 cents to $61.36 per barrel while Brent fell 50 cents to $64.99 per barrel. Total volume traded was about 23 percent below the 100-day average.

Brent crude futures LCOc1 were at $65.58 per barrel, up 9 cents, or 0.1 percent, from their previous close. The global benchmark traded at a $3.47 premium to May WTI.

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Crude prices had risen on Friday and earlier on Monday after the US economy added the biggest number of jobs in more than 1-1/2 years in February.

American explorers cut the number of rigs drilling for oil by four, the first decline since mid-January, Baker Hughes data showed Friday. "They continue to give market share away to the U.S". Iran wants OPEC to work to keep oil prices at about $60 a barrel as an increase toward $70 will encourage shale oil output, the country's Oil Minister Bijan Zanganeh said, the Wall Street Journal reported.

"The longer the deal goes on, it's going to start falling apart", ING commodities strategist Warren Patterson tells Bloomberg.

Some of the market's fears were echoed in money managers' short-selling position.

This week's Consumer Price Index (CPI) release, given its potential impact on the dollar, could be critical, said Bill Baruch, president of Blue Line Futures in Chicago. Contributions of 200 words or more will be considered for publication.

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