HOUSTON, Feb 13 — Oil extended its rally above US$60 (RM214) a barrel in London for the first time this year amid speculation that a decline in US drilling will slow production and curb a global supply glut.

Brent futures rose as much as 2.1 per cent and are headed for a third weekly increase. Apache Corp. is cutting its oil- drilling rigs by 70 per cent while Total SA joins companies including BP Plc and Royal Dutch Shell Plc in reducing spending. Venezuela, Ecuador and Russia are committed to strengthening the market, Venezuelan Oil Minister Asdrubal Chavez said on Twitter. German gross domestic product expanded more than expected in the fourth quarter.

Oil is recovering from the lowest level in almost six years as US drillers cut the number of rigs in service to the fewest since December 2011. Crude will rebound in the second half of this year as low prices slow supply growth and stimulate demand, while the potential for OPEC to support the market “should not be ignored,” according to JPMorgan Chase & Co.

“The various measures being taken by suppliers to cut output are clearly having an effect, while some improvement in economic data from Europe is helping putting a floor under prices,” Michael Hewson, senior market analyst at London-based CMC Markets Plc, said by e-mail. “When you have seven successive months of losses, it’s inevitable at some point you get a pullback, which is what we’re seeing.”

Brent for April settlement rose as much as US$1.26 to US$60.54 a barrel on the London-based ICE Futures Europe exchange and was at US$60.14 at 9.04am local time. The March contract expired on Thursday after increasing US$2.39 to US$57.05, the biggest gain in more than a week. Front-month futures last traded above US$60 on December 29. Prices are up 4.1 per cent this week.

Idled rigs

West Texas Intermediate for March delivery climbed as much as US$1.02, or 2 per cent, to US$52.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract advanced US$2.37 to US$51.21 on Thursday. The volume of all futures traded was about 38 per cent above the 100-day average for the time of day. The European benchmark crude traded at a premium of US$7.30 to WTI for April.

Houston-based Apache, among the biggest operators in the Permian basin in Texas, will reduce its rig count by the end of this month, it said in a statement. Explorers in the US cut the number of machines in service to 1,140 through February 6, the ninth week of decreases, according to Baker Hughes Inc, an oilfield services company.

Total will cut spending and curtail exploration this year, the Courbevoie, France-based company said yesterday. Europe’s second-largest oil firm will trim investment to US$23 billion to US$24 billion, compared with US$26 billion in 2014, and reduce the budget for exploration by 30 per cent to less than US$1.9 billion.

US supply

“Oil is starting to look beyond the glut,” Phil Flynn, a senior market analyst at the Price Futures Group in Chicago, said by e-mail. “Against a backdrop of massive spending cuts and rig counts, oil could make a big comeback.”

Crude stockpiles and production in the US, the world’s biggest oil consumer, surged to the highest levels in more than three decades last week, according to the Energy Information Administration. Inventories expanded to 417.9 million barrels through February 6, the most in records dating back to August 1982, the Energy Department’s statistical arm said.

Production accelerated to 9.23 million barrels a day, the fastest pace in weekly EIA data that started in January 1983. The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.

German gross domestic product surged 0.7 per cent in the fourth quarter after expanding 0.1 per cent in the previous three months, the Federal Statistics Office in Wiesbaden said today. Analysts surveyed by Bloomberg News predicted growth of 0.3 per cent.

WTI may drop next week, a Bloomberg News survey showed. Twenty-one of 39 analysts and traders, or 54 per cent, forecast futures will fall through February 20 while eight respondents predict a price advance. — Bloomberg