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Oil up as U.S. rig count down; market also rises on week

An oil pump is pictured on a sunny day in Baku, Azerbaijan, June 16 , 2015. REUTERS/Kai Pfaffenbach

By Barani Krishnan

NEW YORK (Reuters) - Oil prices rose on Friday after the U.S. oil rig count fell for a ninth straight week, indicating crude production could decline in coming months which might help reduce the global supply glut.

Prices got another boost from separate data showing U.S. oil output in August fell to third lowest figure this year.

Brent, the global benchmark for oil, was up 60 cents, or 1.2 percent, at $49.40 a barrel by 1:11 p.m. EDT (1711 GMT).

U.S. crude futures were up 40 cents, or nearly 1 percent, at $46.46.

Both benchmarks were headed for their first weekly gain in three, helped largely by Wednesday's 6 percent rally, driven by a smaller-than-anticipated build in U.S. crude and sharper-than-expected falls in gasoline and diesel stockpiles. [EIA/S]

U.S. oil drillers removed 16 rigs in the week ended Oct. 30, bringing the total rig count down to 578, the least since June 2010, oil services company Baker Hughes Inc said in its closely followed report.

The drop was a sign that low prices were continuing to keep drillers away from the well pad, signalling lower production over the next several months.

But while U.S. output is declining, global supplies of crude and refined oil products continue to grow, testing storage capacity and hammering oil company results.

This is prompting oil bears to argue that price rallies, such as Wednesday's, cannot be sustained.

"Looking at the bigger picture, there is still lots of oil in the United States," PVM Oil Associates analyst Tamas Varga said. "We should see a softer market in the coming days."

Others are not so sure.

"Although providing fundamental rationale for a 6 percent single day advance remains challenging, we are conceding to a significant improvement in the short term chart picture and a need to lift pricing in order to attract fresh selling," said Jim Ritterbusch of Ritterbusch & Associates, an oil consultancy in Chicago.

A Reuters survey was supportive to the market, showing that Saudi Arabia and Iraq pumped less oil in October than African nations in OPEC, pushing the producer group's output down from near record highs.

Chinese government data also showed the country was doubling crude oil import quotas for 2016.


(Additional reporting by Libby George in London and Aaron Sheldrick in Tokyo; Editing by Dale Hudson, David Evans and Marguerita Choy)