Brent crude books its longest rally in five years as prices bounce back

 
Courtney Goldsmith
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Opec extended its deal to cut supply until March 2018 in May (Source: Getty)

Crude oil resumed its longest rally since 2012 today as data suggests US output is easing from a boom in production.

Brent crude, the global benchmark, was trading 1.39 per cent higher at $49.45 a barrel.

However, rising production from members of the Organisation of the Petroleum Exporting Countries (Opec) still weighs on prices.

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On Friday, data from US energy services firm Baker Hughes revealed drilling activity for new oil production dropped by two rigs. Meanwhile, data from the Energy Information Administration (EIA) showed crude output fell in April for the first time this year.

David Madden, market analyst at CMC Markets, said this bounce could still be part of a downward trend.

"The Baker Hughes rig count report showed the number of active rigs in the US dropped by 2 to 752 rigs, but compared to this time last year, the number of active rigs in the US is still up 121 per cent. The marginal decline is US oil production last week spurred on buyers."

"There is a sense that the huge drop oil suffered between May and June was overdone, and the turnaround in oil is just correction within the wider downward trend."

Oil prices are still down around 14 per cent for the year so far despite Opec's deal to cut production until March 2018 to prop up prices.

In June, Opec production was up by 280,000 barrels per day (bpd), according to a Reuters survey, mainly due to rising output in Nigeria and Libya, which are exempt from the cuts.

Production in Libya has climbed to more than 1m barrels per day for the first time in four years, according to Bloomberg.

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