Monday, Oil prices ascended as futures traders bet the market, saying that it may have bottomed after a recent sudden collapse. Traders claimed that the rise in prices came accompanied by speculative traders upping their investment into crude futures, by taking on large volumes of long positions which would profit from a further price rise.
This is even as physical markets remain bloated by glut in supplies, especially from a relentless rise in the United States drilling.
The rise in new long positions comes after Brent and West Texas Intermediate crude futures have fallen by around 10% below their opening levels on May 25th, when the OPEC-led policy which regards to cutting oil supply to balance the glut in the market and inventories was extended to cover the first quarter of 2018, instead of expiring this June.
At 0101 GMT, Brent crude futures were trading at $48.44 per barrel, which is up by 29 cents or 0.6% from their last close. In addition, United States West Texas Intermediate crude futures were at $46.09 per barrel, up by 26 cents or 0.6%.
While the financial market tends to have some confidence that prices may have bottomed out, the physical market remains bloated, especially due to a rise in the United States drilling for a new oil production. In addition, energy services firm Baker Hughes Inc. BHI.N claimed on Friday, that the United States energy firms added eight oil rigs in the week to June 9, bringing the total count up to 741, the most since April 2015.
In relevance to this, the ongoing drive to find new oil has driven up United States supply by more than 10% since mid-2016, to over 9.3 million barrel per day, a figure by the United States Energy Information Administration or EIA claims will likely to rise above 10 million barrel per day by 2018, challenging the top exporter: Saudi Arabia.