Oil Prices Fall on Higher Rig Count
Oil prices fell on Monday after a rise in US drilling activity but traded close to their recent three-month highs amid, with an upbeat outlook for a trade agreement supporting the crude.
International benchmark Brent crude oil futures tumbled by 0.1% to $66.06 per barrel, while West Texas Intermediate (WTI) dropped by 0.2% to $60.27 per barrel.
Chief Asia market strategist Stephen Innes said the energy commodities market would continue to benefit from the positive developments in the trade between the US and China.
Signs of easing trade tensions have led to improved business confidence and better view of the world economy as well as energy demand.
It has also sent the crude up after the two countries established a phase one trade pact early in December as part of an effort to put the 18-month long tariff war, which has unnerved markets and pressured global economic expansion.
Under the terms of the partial agreement that will be signed in January, the US will have to cut some duties in return for more purchases by Chinese importers of American farm goods.
Trump stated on Saturday that they had achieved a breakthrough on the trade deal, and they will be signing it very shortly.
With a more constructive global macro outlook than at any time in the last year, oil is well supported by both fundamental factors and sentiment now, Innes said.
Elsewhere, the precious metals segment traded in green territory on Monday, with the safe-haven gold gaining 0.4% to $1,488.15 per ounce, while silver added 1.1% to $17.427 per ounce.
Palladium advanced 2.1% to $1,84.20 per ounce, while platinum surged 1.1% to $924.05 per ounce.
Higher Output Expected to Pressure Oil Prices
Oil prices might still face pressure, as the latest rig count data showed the number of rigs rose to its highest in a week since February 2018.
US drillers added 18 oil rigs in the week to December 20, bringing the overall count to 685, the most since November, according to data from a US energy services firm.
While the rig counts are on course to decline for the first year since 2016, as drillers reduced their spending to focus on returns, higher productivity would suggest that output in most shale basins has climbed to record levels in 2019.
The Energy Information Administration estimated oil production to increase at 12.3 million barrels per day (BPD) this year and 13.2 million BPD in 2020 from a record 11.0 million BPD last month.
The Organization of the Petroleum Exporting Countries (OPEC) and other major producing countries led by Russia have decided this month to further output cuts in the first quarter of next year.
Crude stockpiles will be growing in 2020 on production from countries, including the US, Brazil, Norway, and Guyana, which started operations last week.
