Oil rose above $49 a barrel on Monday as a slowdown in the growth of rigs drilling in the United States eased concern that surging shale supplies will undermine OPEC-led cuts.
U.S. drillers added two oil rigs in the week to July 14, bringing the total to 765, Baker Hughes said on Friday. Rig additions over the past four weeks averaged five, the lowest since November.
“The slowing pace of increases combined with massive drawdowns last week on both official crude inventory numbers from the U.S. probably explains the positive sentiment in general at the moment,” said Jeffrey Halley at brokerage OANDA.
Brent crude , the global benchmark, was up 19 cents at $49.10 a barrel by 0844 GMT. U.S. crude traded at $46.71, up 17 cents.
Oil prices are less than half their mid-2014 level because of a persistent glut even after the Organization of the Petroleum Exporting Countries, plus Russia and other non-members started a supply-cutting pact in January.
U.S. crude oil inventories in the week to July 7, the most recent, dropped the most in ten months, raising expectations that a long-awaited market rebalancing is under way.
While the OPEC-led cuts have offered prices some support, rising supplies from Nigeria and Libya, two OPEC members exempt from the pact, have weighed on the market, as has growth in U.S. shale production.
Kuwait said on Friday the market was on a recovery track due to rising demand and that it was premature to cap Nigerian and Libyan output. An OPEC and non-OPEC committee meets in Russia on July 24 to discuss the impact of the deal.
In a sign of strong demand, data on Monday showed refineries in China increased crude throughput in June to the second highest on record. OPEC is hoping higher demand in the second half will get rid of excess inventories.
“There is almost an agreement that the second half of the year should be tighter than the first half due to significant jumps in demand forecasts,” oil broker PVM said. “The net result is a rise in the demand for OPEC oil.”