CRUDE oil prices rose to fresh 2016 highs in Asia yesterday as a slowdown in U.S. drilling and increase in Chinese crude refinery processing bolstered hopes a supply glut would ease sooner than expected.

    The rise also came after long-time bear Goldman Sachs said the market had ended almost two years of oversupply and flipped to a deficit following global oil disruptions.

    Brent crude futures were trading at US$48.47 per barrel in the afternoon, up 64 cents, or 1.3 percent, from their last settlement. U.S. crude futures were up 62 cents, or 1.3 percent, at US$46.83 a barrel.

    U.S. oilfield services firm Baker Hughes said the number of U.S. drilling rigs fell to its lowest level since October 2009, which is good news for prices as U.S. production is a key contributor to the oversupply.

    Chinese refineries also processed crude at record rates in April while production dipped to a 14-month low, China’s government data released at the weekend showed.

    “There is evidence that the market is moving back toward balance,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.

    “Given the proximity to the top of the broader trading range between US$48 and US$50 a barrel, it seems less likely that oil can push significantly higher.”

    Crude oil prices rose last week after the International Energy Agency said the glut could ease in the second half of this year and OPEC oil producers said the oversupply “may be easing” on reduced output by its members.

    EY oil and gas analyst Sanjeev Gupta said the market will be closely watching the release Wednesday of U.S. commercial crude inventories, a gauge for demand in the world’s top oil consumer.

    Also, supply disruptions around the world of as much as 3.75 million barrels per day have wiped out a glut that pulled down oil prices by as much as over 70 percent between 2014 and early 2016.

    The disruptions have now triggered a U-turn in the outlook of Goldman Sachs, which long warned of overflowing storage and another looming price crash.

    “The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected,” Goldman said.

    “The market likely shifted into deficit in May ... driven by both sustained strong demand as well as sharply declining production,” it said, flipping the market from a 2 million barrels per day in 2015 supply overhang to a deficit of over 400 million barrels per day by the fourth quarter this year.

    However, Goldman cautioned that the market would flip back into a surplus of 258-403 million barrels per day in the first half of 2017.

    In Nigeria, output has fallen to its lowest in decades at around 1.65 million barrels per day following several acts of sabotage.

    In the Americas, Venezuela seemed on the brink of meltdown, triggering fears of default by its national oil company PDVSA, which has to make almost US$5 billion in bond payments this year.

    Venezuela’s oil production has already fallen by at least 188,000 barrels per day this year.

    In the United States, crude production has fallen to 8.8 million barrels per day, 8.4 percent below 2015 peaks as the sector suffers a wave of bankruptcies. (SD-Agencies)