WTI oil futures hold near 5-month peak on U.S. supply outlook

Investing.com - West Texas Intermediate oil futures held near a five-month peak hit in the previous session on Thursday, as concerns over a supply glut eased after the first drawdown in U.S. crude inventories since January.

On the New York Mercantile Exchange, crude oil for June delivery dipped 14 cents, or 0.22%, to trade at $60.80 a barrel during European morning hours.

A day earlier, Nymex oil rallied to $62.58, the most since December 10, before ending at $60.93, up 53 cents, or 0.88%.

The U.S. Energy Information Administration said Wednesday that crude oil inventories fell by 3.9 million barrels last week to 487.0 million, compared to expectations for an increase of 1.5 million barrels to 492.4 million.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, fell for the second consecutive week, dropping by 12,000 barrels to 61.7 million.

U.S. oil futures are up nearly 40% since hitting a recent low on March 18 amid mounting expectations that U.S. shale oil production has peaked and may start falling in the coming months amid an ongoing collapse in rigs drilling for oil.

According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. fell by 24 last week to 679, the 21st straight week of declines and the lowest level since September 2010.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for June delivery inched up 5 cents, or 0.07%, to trade at $67.82 a barrel.

On Wednesday, London-traded Brent futures rose to $69.63, a level not seen since December 5, before closing at $67.77, up 25 cents, or 0.37%.

Brent prices remained supported by concerns over a disruption to supplies from Libya and after Saudi Arabia raised crude prices to buyers in Asia earlier in the week.

The spread between the Brent and the WTI crude contracts stood at $7.02 a barrel, compared to $6.84 by close of trade on Wednesday.

Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 94.20, not far from the two-month trough of 93.96 set on Wednesday.

The greenback remained under pressure after payroll processing firm ADP said on Wednesday that U.S. non-farm private employment rose by 169,000 last month, below expectations for an increase of 200,000.

The downbeat data fuelled fears that the government employment report, due out on Friday, would also fall short of forecasts. The report was expected to show a gain of 224,000 jobs in April, following an increase of just 126,000 in March.

A strong U.S. nonfarm payrolls report was likely to bring forward expectations on when the Federal Reserve will begin to raise rates, while a weak number could weigh on the dollar by undermining the argument for an early rate increase.

Recent economic reports have indicated that the economy has slowed since the start of the year prompting many investors to push back expectations on the timing of an initial rate hike by the Fed.