Oil up on weaker dollar, supply glut caps gain

Ruptured Pipeline Spills Oil Along Santa Barbara Coast

Oil fell for a fifth week after slipping into a bear market on concern that rising production from the U.S.to Libya will offset cuts from OPEC and its allies. Iran was allowed a small increase to recover market share lost under Western sanctions.

Oil settled higher Monday, tallying their third straight session of gains, despite ongoing pressure from expectations of further growth in US output.

"It is just the fact that the oil market stopped falling ..."

The advance came after WTI and Brent both settled higher Monday (http://www.marketwatch.com/story/oil-prices-up-1-rising-for-third-session-in-a-row-2017-06-26), helped by forecasts for a weather-related weekly decline in US crude supplies, despite ongoing pressure from expectations of further growth in USA output.

"Oil may be close to the bottom but badly damaged sentiment and a rising (U.S.) rig count will dent the recovery", US bank Citi said on Tuesday.

Analysts at Bank of America-Merrill Lynch said demand had not grown quickly enough to mop up any excess output.

"Indeed, the market may simply be re-learning an old lesson that the U.S. shale oil sector has fundamentally changed the supply curve, with elastic supply at a break-even price that was low two years ago and is probably even lower today".

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Tim Evans, Citi Futures' energy futures specialist, said in a note that oil's upswing was "a technical correction after the declines of the past five weeks" helped along by boosts from a weaker dollar and forecasts for a weekly draw in US crude inventories.

Imports of Saudi barrels into the U.S.so far this month have dropped below one million barrels per day for the first time since last November. "I suspect short covering", said Ric Spooner, chief market analyst at CMC Markets in Sydney. "It has moved a long way in response to that news, maybe we are getting to a point that there is upside risk to any good news".

Commerzbank said in a research note was quoted by the news agency as saying: "Short-term financial investors also significantly scaled back their net long positions in Brent on the ICE last week. and find themselves at their lowest level in a year and a half".

The gains had additional support from bargain hunters who stepped in after crude futures. The contract added 29 cents, or 0.6 percent, to $45.83 on Monday.

The commodity has fallen almost 20 percent year to date, the biggest first-half slide in 20 years, according to Reuters.

USA crude futures were up 37 cents, or 0.8 percent, at $43.38 a barrel. "If we keep going down, we're not going to be adding rigs in a few months, we're not going to be adding production". Given the journey time to United States shores (hark, seven-ish weeks), the expectation was that we would start to see lower volumes reflected in the June data.

OPEC member countries and its partners have been trying to reduce a global crude glut with production cuts. In the last week, there was an increase of 11 operating rigs in the USA, pushing the total number to 758, the highest since April 2015.

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