Brent crude reversed early losses to steady above $65 at the start of the week as signs that US shale output may have started to decline, offset the effects of a strong dollar.
The number of active US rigs drilling for oil has fallen for a record 20 weeks in a row to its lowest since 2010, according to data from oil services company Baker Hughes, fuelling expectations of a drop in US production.
“We believe that the increase in U.S. oil production will slow and that it could also decline in the short term,” Germany’s Commerzbank said in a note on Monday.
Brent LCOc1 edged up 6 cents to $65.34 a barrel by 1328 GMT (9.28 a.m. ET) Monday, having touched a low of $64.60 on dollar strength earlier in the session.
US crude Clc1, called WTI, was up 37 cents at $57.52 a barrel, having slipped to $56.71 earlier.
The dollar was trading 0.1 percent higher against a basket of currencies. DXY, easing back from 0.3 percent earlier in the day. A strong US currency makes dollar-traded commodities such as crude oil more expensive for holders of other currencies.
Fighting in Yemen raged on as Saudi Arabia continued its air strikes against Houthi militia forces in Aden.
While Yemen itself is not among the biggest oil producers in the region, Gulf producers ship oil along the Gulf of Aden on Yemen’s southern coast and through the narrow straits of Bab el-Mandeb, between Yemen and Djibouti.
Analysts at Bank of America Merril Lynch raised their oil forecast for Brent and WTI.
“The market seems to have found a spot price low, and we lift our end of 2Q15 targets for WTI and Brent to $59 and $63 a barrel,” they said in a note. “We revise up our 2016 Brent forecasts to $62 from $58, but remain bearish relative to the forward due to the big oil overhang.”
Saudi Arabia’s Oil Minister Ali al-Naimi told officials in Beijing that the kingdom is ready to supply China with additional oil if required, the Saudi Press Agency said on Monday.
Hedge funds and other money managers raised their bets on rising Brent crude prices for a fifth week in a row to a new record, exchange data showed on Monday.
