Brent crude holds near 4-1/2 month high on Yemen, U.S. rig count

By Reuters

Apr 27, 2015 12:41 AM EDT

Brent crude prices held near a 4-1/2 month high above $65 a barrel on Monday, supported by concerns about fighting in Yemen disrupting Middle East supplies and signs that U.S. shale output may have started to decline.

The number of active U.S. rigs drilling for oil has fallen for a record 20 weeks in a row to the lowest since 2010, according to Baker Hughes data.

"Support for oil actually came from a lot of positive speculation that oil supply from the U.S. is actually going to drop," said Shunling Yap, a senior oil analyst at BMI Research.

The U.S. Energy Information Administration's forecast of a drop in oil output in May from April, the first monthly decline in four years, also supported bullish bets, she added.

Brent dropped 20 cents to $65.08 a barrel by 0356 GMT after posting its third weekly gain last week and touching a Dec. 10 high of $65.80.

U.S. crude fell 28 cents to $56.87 a barrel after rising for the sixth consecutive week, its longest stretch of gains since the first quarter of 2014.

The latest rig count points to a slight decline in U.S. oil production between the second and third quarter, resulting in a 200,000 barrels per day (bpd) growth year-on-year in the fourth quarter, Goldman Sachs analysts said in an April 24 note.

But next year's output is expected to grow at a faster pace of 280,000 bpd due to increased productivity and a backlog of uncompleted wells, the bank said.

Fighting in Yemen raged on as Saudi Arabia continued its air strikes against Houthi militia forces in Aden, but there were no fresh moves towards dialogue.

While the Yemen crisis has raised the risk premium for oil, BMI's Shun said supply from the world's top exporter Saudi Arabia remained steady and there was no immediate threat to major oil shipping routes in the region.

Libya's oil output is set to fall again as a strike by Libyan security guards over salary payments has forced the closure of the western El Feel oilfield, a spokesman for state oil firm NOC said on Sunday.

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