Oil prices fell on Dec. 23 after an increase in U.S. drilling activity, but held near recent three-month highs on hopes for a trade deal between the United States and China.
Brent crude was down 22 cents, or 0.33%, at $65.92 per barrel by 0742 GMT in thin trading ahead of the Christmas holiday. West Texas Intermediate was down 25 cents, or 0.41%, at $60.19 a barrel.
Oil prices have risen since the two nations signed a so-called phase one trade deal earlier this month following months of tit-for-tat negotiations that unsettled markets.
Under a deal due to be signed in January, the United States is expected to agree to reduce some tariffs in return for a big increase in purchases by Chinese importers of U.S. farm products.
"Oil prices will continue to benefit from the positive developments in the U.S.-China trade," said Stephen Innes, chief Asia market strategist at AxiTrader.
"With a more constructive global macro outlook than at any time in the last year, oil is well-supported by both fundamental factors and sentiment now," he said.
But data showing that U.S. energy companies added the most oil rigs this week since February 2018, primarily in the Permian shale basin, put pressure on prices.
Although the oil rig count was on track to fall for the first year since 2016 as drillers slash spending to focus on returns, higher productivity means that oil output in most shale basins has increased to record levels this year.
The U.S. Energy Information Administration projected crude output would rise to 12.3 million barrels per day (MMbbl/d) in 2019 and 13.2 MMbbl/d in 2020 from a record 11.0 MMbbl/d in 2018.
OPEC and other top producing nations led by Russia agreed this month to deepen output cuts in the first quarter of 2020.
Global supply is expected to rise next year on output from countries including the United States, Brazil, Norway and Guyana, which became an oil producer last week.
Many investors are on holiday already with the end of the year around the corner and trading is thin, potentially accentuating market moves due to the lack of liquidity.
"With the holiday season upon us with much-reduced volumes and liquidity, some choppy daily moves can ... be expected," said Jeffrey Halley, senior market analyst at OANDA.
Recommended Reading
Grey Rock Agrees to $1.3 Billion Business Combination with Paul Ryan-backed SPAC
2022-05-16 - Grey Rock will contribute oil and gas assets in the Permian Basin, Bakken, Eagle Ford Shale, D-J Basin and Haynesville Shale plays to form Granite Ridge Resources.
ConocoPhillips Promotes Jack Harper; Tim Leach Moves into New Role
2022-05-02 - Both Tim Leach and Jack Harper joined ConocoPhillips following the combination in 2021 of the company with Concho Resources, where Leach and Harper had served as CEO and president, respectively.
Pioneer, ConocoPhillips, Chesapeake Execs Eye Single-digit Growth in US Shale
2022-03-10 - “We’re not going to chase growth like we all did over the last 10 years. We’re going to limit our growth to 5% long-term,” Pioneer Natural Resources CEO Scott Sheffield said during a CERAWeek panel focused on U.S. shale.
Talos Energy’s Robin Fielder Discusses Carbon Capture Value Proposition
2022-04-19 - Robin Fielder, EVP of low carbon strategy and chief sustainability officer at Talos Energy who is also an honoree of Hart Energy’s Oil and Gas Investor Influential Women in Energy program, shares the value proposition for carbon capture.
Devon Energy Talks ESG Goals, Pathways to Reducing Emissions
2022-02-28 - Garrett Jackson, Devon Energy’s head of ESG and EHS, outlines pathway to net-zero emissions including how the U.S. shale producer plans to eliminate flaring.