Crude futures advanced on a report showing that monthly oil production from seven key US shale plays was going to fall in July and hopes of an economic stimulus by China’s government.
Light sweet crude for July delivery traded up $1.93 or 3.31% at $59.75 a barrel on the New York Mercantile Exchange to rally from weakness on Monday after concerns over falling Chinese demand weighed on the prices.
Brent Futures, the global benchmark, climbed by $2.23 or 3.57% to $64.64 a barrel on the London based ICE Futures Exchange.
“Anytime we get more than $5 below [recent highs], it seems as if the selling pressure kind of dissipates,” Gene McGillian, senior analyst at Tradition Energy, told the Wall Street Journal.
“What’s really driven our rally this year from our six-year lows is the idea that measures by North American producers are going to affect production levels by some point in the next three to six months.”
The Energy Information Administration’s drilling productivity report, released late Monday, forecasted that Shale production in the seven major regions would fall by 91,000 barrels a day In July to reduce output to 5.5 million barrels a day.
“It’s an across-the-board run as we wait for the inventory data,” said Phil Thompson at Mobius Risk Group, an energy investment advisory in Houston, told Reuters.
Shale output levels have been a key factor in the growth in total US crude production in recent times helping push crude prices lower on concerns over tepid global demand amidst an oil glut.
Also aiding the rally was expectations that US crude inventories would fall for the fifth straight week according to the report by the government-backed Energy Information Administration due Wednesday.
Signs of possible monetary easing in, China, the world’s biggest crude importer, also helped drive crude prices higher today. Chinese inflation clocked in at 1.2% in May, the latest indication of weakness in the world’s second biggest economy suggesting that stimulus measures were on the way.
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