Futures speculations made oil prices higher; Rise in U.S. drilling results to a bloated market

US crude oil

The price of oil was higher on Monday after futures traders are speculating that the market is likely to have bottomed following its abrupt decline on previous trade. Physical markets are still brimming with supply due to the heightened drilling in the United States.

According to traders, higher prices came behind projected traders boosting their investment to crude futures by taking on immense volumes on long positions. The fresh heightened long positions came ahead when WTI and d Brent crude futures have slipped as much as 10 percent below their starting levels on May 25. This is when a policy by the Organization of Petroleum Exporting Countries to reduce production was prolonged to cover the first three months next year, rather than ending it this month.

U.S. West Texas Intermediate crude futures were 0.6 percent up, or 26 cents to settle at $46.09 a barrel. International benchmark Brent crude futures also advanced by 0.6 percent or 29 cents to trade at $48.44 a barrel on the day.

Financial markets may be positive on the bottoming out of prices, but the physical market is still bloated. This is mainly because of the rise in U.S. drilling for fresh oil output. According to energy services company Baker Hughes, energy firms in the country added eight oil rigs in the week until June 9, the total count since April 2015 came in at 741.

The growing movement to search new oil has made the production in the U.S. higher as much as 10 percent since the first and second quarter of 2016. The given figures could possibly jump above 10 million barrels per day (bpd) by 2018 according to the U.S. Energy Information Administration.

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