New | Oil bears miss rally as US drillers idle rigs
Momentum for crude prices starts to look optimistic in the wake of slowing production amid plans by US oil companies to cut spending
Speculators who bet against crude missed out on the biggest rally in 31 months as a record decline in US oil rigs spurred speculation that production will slow.
Money managers cut net-long positions in West Texas Intermediate crude for a second week in the seven days to last Tuesday, boosting short wagers to the highest level since 2010, US Commodity Futures Trading Commission (CFTC) data shows.
Three days later, Baker Hughes said drillers pulled 94 rigs from US fields in a single week, the most on record, driving crude prices to their biggest gain since June 2012. Oil tumbled 51 per cent in the past year as US output reached a three-decade high and the Opec oil producers' cartel refused to cut production to stem a global glut. Oil companies have announced more than US$20 billion in spending cuts so far this reporting season.
"The momentum is now starting to look bullish," said Phil Flynn, a senior analyst at Price Futures Group in Chicago. "The drop in the rig count and spending is going to substantially reduce oil production later this year into next year."
Futures jumped 8.3 per cent to US$48.24 a barrel on the New York Mercantile Exchange on Friday but fell back US$1.42 to US$46.82 in electronic trading early yesterday afternoon in Asia. WTI shed 16 US cents to US$46.23 in the period covered by the CFTC report, dropping to US$44.45 last Wednesday, the lowest settlement since March 2009.
The United Steelworkers union, which represents employees at more than 200 US oil refineries, terminals, pipelines and chemical plants, began a strike at nine sites on Sunday, the biggest walkout called since 1980. A full walkout of the union's workers would threaten to disrupt as much as 64 per cent of US fuel production.