Oil edges above $49 on US drilling slowdown

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  • As Nigerian inflation ‘falls for fifth straight month’

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.”

In the meantime, the Nigerian economy is gradually coming out of recession, with the annual inflation falling in June for the fifth straight month, the National Bureau of Statistics said Monday.

The bureau said inflation, measured by the Consumer Price Index, fell to 16.10 per cent, lower than 16.25 per cent rate recorded in May.

“The latest index represents the fifth consecutive decline in the rate of inflation since January 2017,” the statistics agency said.

The index reflects the average change over time in prices of goods and services consumed by people for day-to-day living.

On a month-on-month basis, the NBS said the index was 0.30 per cent lower than 1.88 per cent recorded the previous month.

The report noted that the price movement reflected the eigth straight month of decline in the core index since November 2016.

The Urban index rose by 16.15 percent (year-on-year) in June 2017 from 16.34 percent recorded in May, while the Rural index increased by 16.01 percent in June from 16.02 percent in May.

On month-on-month basis, the urban index rose by 1.60 percent in June from 1.84 percent recorded in May, while the rural index rose by 1.57 percent in June from 1.92 percent in May.

The corresponding 12-month year-on-year average percentage change for the urban index increased from 18.88 percent in June to 18.69 percent in May.

Corresponding rural index also increasing from 16.50 percent in May to 16.56 percent in June.

Further review of the latest report showed that the Composite Food Index rose by 19.91 per cent during the month.

The rise was as a result of increases in prices of meat, bread and cereals, fish, potatoes, yam and other tubers, oils and fats, milk, cheese and eggs, coffee, tea and cocoa.

The highest increases were recorded in prices of solid fuels, clothing materials and other articles of clothing and clothing accessories, liquid fuels, spirits, books and stationeries, passenger transport by air, garments, shoes and footwear and motorcycles.

The average 12-month annual rate of rise of the index was at 16.22 per cent for the 12-month period ending in June 2017, about 0.35 per cent points lower from the 12-month rate of change recorded in May.

Vanguard with additional report from Premium

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