July 3 (UPI) -- A rally in oil prices set off by lower U.S. rig counts spilled over into Monday as the mentality shifts away from the Middle East, an analyst said.
Crude oil prices were pulled out of the long retraction that began in mid June in response to a slight decline in U.S. crude oil production levels. Lower rig counts reported Friday by oilfield services company Baker Hughes pushed oil prices closer to the psychological threshold of $50 per barrel.
"The production and rig count cut last week has changed the short-term focus and this has made the market relative immune to news on the production front, such as the latest crank up in Libyan production," Ole Hanson, the head of commodity strategy at SaxoBank, told UPI.
Libyan oil production is moving in on 1 million barrels per day, near its pre-war capacity. Libya is exempt from a deal lead by the Organization of Petroleum Exporting Countries to balance an oversupplied market through managed declines. Parties to the agreement meet in late July to consider the impact, just as questions circulate about OPEC unity in the wake of a regional crisis tied to Qatar.
Crude oil prices may be oscillating around a Goldilocks number – one not so low that it stifles investments and revenue, but not so high that it stimulates the development necessary to drive production figures upward.
Last week saw U.S. President Donald Trump highlight the nation's energy sector, oil and natural gas in particular. Exports and energy dominance were themes for the administration, though oil prices hit seven-month lows in mid-June and curbed the appetite for some spending in U.S. shale, a factor highlighted by last week's rig count report.
"It looks like oil has bottomed," Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter. "A report of a slight uptick in OPEC production as well as dollar strength may pull us back a bit, but the bulls are back in control after the bears mauled this market [last month]."
Outside of Libya, the Abu Dhabi National Energy Co. said Monday it started oil production from its Atrush prospect in the Kurdish north of Iraq. Production this year could reach 30,000 barrels of oil per day. Iraq is a member of the OPEC-led effort to balance the market, thought it raised questions about the agreement last year.
Elsewhere, Iran signed its first agreement with foreign energy companies in more than a decade on Monday. While involving a natural gas field, the agreement could open Iran up to further investments from oil companies eager to tap into the post-sanctions climate in Iran, which is the only member of OPEC with room for production growth.
U.S. markets are closed Tuesday for the Independence Day holiday.