West Texas Intermediate crude futures for August delivery were marked 0.3% higher at $46.17 by mid-day in London after hitting an intraday price of $46.43, the highest since June 14. Lower rig counts reported Friday by oilfield services company Baker Hughes pushed oil prices closer to the psychological threshold of $50 per barrel.
Investors came into this year optimistic, and indeed, USA crude prices topped out near $55 a barrel in February in the wake of the deal struck by the Organization of the Petroleum Exporting Countries with other key producers to reduce supply by 1.8 million barrels per day (bpd) that began in January.
Stephen Brennock, an analyst at PVM Oil Associates Ltd.in London, said: "A further pillar of price support came as the relentless surge in US drilling activity took a break". At 756 rigs, U.S. oil rigs have more than doubled from the same time past year and point to more increases in oil output.
Crude oil prices are up more than 5 percent from one week ago, but WTI is still about $3 less per barrel than at the start of June. Despite Opec's attempts to lift prices, oil is trading near nine-month lows as fundamentals remain unsupportive.
Oil fell 14 percent in the first half of 2017 due to a global supply glut that OPEC's historic deal with Russian Federation failed to alleviate. Robust appetite from Japanese and South Korean buyers could help soak up excess supplies.
But on Monday some investors said the rally may have gone too far, with an increase in Libyan crude production reminding them of the abundance of oil. The rig count had risen for the previous 23 weeks.
USA markets are closed Tuesday for the Independence Day holiday.
Crude oil prices were pulled out of the long retraction that began in mid June in response to a slight decline in US crude oil production levels.
OPEC and non-OPEC allies led by Russian Federation initially agreed to cut about 1.8 million barrels per day (bpd) in the first half of 2017. According to market analyst expansion in shale drilling as well as a better than expected rebound in the Nigeria, Libya production figures are expected to impact the pricing significantly.
"It would be in the best interest of OPEC to plan on continuing curtailing production after the end of March 2018 so as to maintain the 9 to 10 percent gain in revenues achieved in 2017", he said.