Oil Surges 8% As US Rig Count Plunges, Shorts Cover
NEW YORK, Jan 30 (Reuters) - Oil prices rocketed more than 8 percent higher on Friday, their biggest one-day gain in two and a half years, after data showed U.S. drillers were slamming the brakes on the shale drilling boom.
In a rally that may spur speculation that a seven-month price collapse has ended, global benchmark Brent crude shot up to more than $53 per barrel, its highest in more than three weeks, after Baker Hughes data showed the number of rigs drilling for oil in the United States fell by 94 - or 7 percent - this week.
Two weeks of relatively stable oil prices have helped shift sentiment after months of decline, setting the stage for the violent rebound on Friday afternoon. Short traders raced to cover their positions on fears that the rout was nearing its end.
"The rig count number sparked the rally late," said Phil Flynn, analyst at Price Futures Group in Chicago.
The rig count drop was the most since 1987. With drillers having idled about 24 percent of their oil drilling rigs since the summer, some traders may be betting that an anticipated slowdown in U.S. oil production is nearer than expected.
Yet, some traders were not convinced that the selloff in oil, which has taken Brent down from a June high above $115 a barrel, was over.
"There was a lot of short-covering before the month end from people wanting to take profit from the $40-odd lows, so it's not surprising that we rallied, said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.
"But this doesn't change the fundamental outlook in oil. We are still about 2 million barrels oversupplied."
Brent settled up $3.86 at $52.99 a barrel, after running to as high as $53.08.
U.S. oil futures finished up $3.71 at $48.24 a barrel, soaring by nearly $3 in a final frenzied hour.
(Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Editing by Jason Neely, John Stonestreet, Bernadette Baum, Gunna Dickson and Lisa Shumaker)
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