Crude oil prices rallied more than 5% at the start of the new week as a report from an influential industry watchdog put attentions on likely declines in production from US shales this year.
The International Energy Agency (IEA) report said output from US shale operations would be some 600,000 barrel per day lighter over the course of 2016.
It also estimated that a further 200,000 barrel per day reduction would come through 2017, and only then would the market begin to rebalance.
At the same time the most recent rig count, conducted by Baker Hughes, also indicated a drop off in activity. Lower activity and investment, amid low crude prices, is the primary reason for the slowdown in shale oil production.
The IEA report wasn’t, however, all encouragement for oil traders.
It also predicted that a subsequent ‘fight back’ among shale producers would potentially see the region achieve new highs for production volumes by 2021. The IEA described a ‘free for all’ in the oil market in the medium term.
In London trading, on Monday, Brent crude gained just over 5% to about $34.70 while West Texas Intermediary futures were up 5.1% at $33.50.