Oil surges on signs of tightening US supplies in volatile trade

World oil prices surged last week after recent heavy losses, aided by signs of tightening US supplies, according to analysts.

AFP/LondonWorld oil prices surged last week after recent heavy losses, aided by signs of tightening US supplies, according to analysts. OIL: Crude futures shot higher in volatile trading as data revealed production cuts that could curb the supply glut. The Baker Hughes North America rig count fell sharply in the week to January 30, dropping by 128 rigs to 1,937. That compared with 2,393 a year ago. Deep cuts in capital spending by major oil companies, including new announcements Tuesday by BP and BG Group, also suggested there would be tighter supplies in the future. “A lot of factors are at play. Obviously, the capital spending cuts just keep coming, with BP, and we’re seeing one of the fastest drops of spending across the sector I can remember,” said Phil Flynn of Price Futures Group. Some analysts cautioned the current oil price rebound likely would not last because supplies still far outweigh demand. “Oil... has enjoyed the combination of weakening supply and rising demand fundamentals to maintain its surge,” said Chris Beauchamp, market analyst at trading firm IG. “Oversupply does not disappear overnight, however, and the jury is still out on whether this bounce (in prices) has much further to run.” Crude futures were hammered Wednesday by official data showing another increase in US crude inventories, hitting 30-year highs. WTI shed nearly $5, or almost 9% in one day, echoing a price plunge in Brent that was the steepest since November. Oil prices plunged by about 60% from their June peaks to a six-year low last week, largely owing to a surge in global reserves boosted by robust US shale production. The problem was exacerbated in November after the Opec cartel insisted that it would maintain output levels despite plunging prices. The 12-nation group pumps about 30% of global crude. By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in March soared to $58.08 a barrel from $49.65 one week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for March rallied to $50.48 a barrel compared with $45.35.