Global oil prices settled 5% higher on Friday in their second consecutive week of gains as US producers cut production with the number of drilling rigs falling to a record low, and as more countries and states pushed ahead with plans to relax lockdowns intended to control the spread of the coronavirus pandemic.
The number of operating oil and natural gas rigs fell by 34 to an all-time low of 374 this week – reflecting data going back 80 years – as the energy industry slashes output and spending to deal with the coronavirus-led crash in fuel demand.
The previous low was 404 set in May 2016.
US producers have cut an average of 55 rigs a week since mid-March after crude prices started to plunge due to the coronavirus and a brief oil price war between Saudi Arabia and Russia.
The count in Canada already fell to a record low of just 26 rigs two weeks ago, according to Baker Hughes.
North American oil companies have shut production faster than analysts expected and are on track to withdraw about 1.7 million barrels per day (BPD) of output by the end of June.
On Friday Brent crude settled up $US1.51, or 5.1%, at $US30.97 a barrel while West Texas Intermediate (WTI) crude futures rose $US1.19, or 5%, to $US24.74 a barrel.
Both contracts posted the second week of gains, with Brent jumping 18% and WTI up about 33%.
The US lost a staggering 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression. Markets ignored that news.
In an assessment on oil on Friday, IHS Markit said the second quarter of this year will “see the largest volume of liquids production cuts, including shut-in production, in the history of the oil industry.”
It expects as much as 17 million barrels a day total liquids output, including nearly 14 million barrels per day of crude oil production, to be cut or shut-in during the period between April and June.
IHS Markit also expects oil demand in the second quarter of 2020 to be 22 million barrels a day less than a year ago.
“This collapse in demand combined with low oil prices, storage constraints, and government-ordered cuts are driving what is an extraordinary level of liquids production cuts and shut-ins around the world,” it said.
