Brent crude prices held near a 4-1/2 month high above $65 a barrel on Monday, supported by concerns over fighting in Yemen disrupting Middle East supplies and signs that U.S. shale output may have started to decline.
The number of active U.S. rigs drilling for oil has fallen for a record 20 weeks in a row to the lowest since 2010, according to Baker Hughes data, fuelling expectations of a drop in U.S. production. Brent had edged down 5 cents to $65.23 a barrel by 0623 GMT, after posting its third weekly gain last week and touching a December 10 high of $65.80. U.S. crude fell 14 cents to $57.01 a barrel, after rising for the sixth consecutive week in its longest stretch of gains since the first quarter of 2014. The latest rig count points to a slight decline in U.S. oil production between the second and third quarter, resulting in a 200,000 barrels per day (bpd) growth year-on-year in the fourth quarter, Goldman Sachs analysts said in an April 24 note. But next year’s output is expected to grow at a faster pace of 280,000 bpd due to increased productivity and a backlog of uncompleted wells, the bank said. Fighting in Yemen raged on as Saudi Arabia continued its air strikes against Houthi militia forces in Aden, but there were no fresh moves towards dialogue.
The dollar started the week on the defensive on Monday after more disappointing U.S. economic data reinforced expectations the U.S. Federal Reserve will not hike interest rates any time soon, while concerns about Greece’s debt talks pressured the euro. The dollar was buying 118.93 yen, down about 0.1 percent on the day and well below last week’s high of 120.10 yen touched on Thursday, and back toward its April low of 118.525 plumbed one week ago. “I think the range-bound trading will be continuing for the dollar/yen, with the upside at 120 and the downside at 118,” said Kaneo Ogino, director at Global-info Co in Tokyo, a foreign exchange research firm. The Bank of Japan will meet on Thursday, and is widely expected to hold policy steady. The policy decision, however, might be influenced by the median inflation forecast produced at the meeting.