A drop in drilling activity and rise in tensions with Iran sent oil prices up Friday, as U.S. benchmark crude closed the week above $50 per barrel for the first time since February.
U.S. drillers idled 42 oil rigs this week, according to the latest figures from oilfield services company Baker Hughes Inc. — a bigger drop than in the last few weekly reports — suggesting the slowdown in the oil patch isn’t coming to an end any time soon.
That falling rig count boosted traders’ hopes that U.S. production may finally slow enough later in the year to ease a worldwide glut that has sent prices tumbling since November.
“There are expectations of a production deceleration in the U.S. as a result of the implosion of drilling activity,” said Bill Herbert, an analyst at energy investment bank Simmons Co. International.
U.S. benchmark West Texas Intermediate crude climbed 85 cents to $51.64 on the New York Mercantile Exchange. International benchmark Brent crude rose $1.30 to $57.87 in European trading.
Other factors contributing to Friday’s oil price spike included signs of growing demand for oil domestically and abroad, and stabilization in the values of the dollar and euro, Herbert said. The greenback has retreated from a rally that had kept prices down by making dollar-priced oil less attractive to investors using other currencies.
Also of note to traders were indications that a nuclear deal with Iran might be facing headwinds — a prospect that could delay or squelch an easing of sanctions that would allow Iran to flood the market with oil, pressing prices downward.
Ayatollah Ali Khamenei, Iran’s supreme leader, has questioned elements of a framework deal western and Iranian negotiators crafted earlier this month.