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Crude oil markets rose on Monday after hitting a five-year low, rebounding after data suggested that tumbling prices may have started to affect drilling activity in the fast-growing US shale oil industry.
A weaker dollar, which makes commodities denominated in the greenback more affordable to holders of other currencies, also enticed buying in oil and other natural resource markets, traders said.
Benchmark Brent crude oil was up $1.15, or 1.7 per cent, at $71.30 a barrel by 10:25 am EST (1525 GMT). It had fallen $2.62 earlier to $63.72, a low since July 2009.
US crude was up $1.35, or 2 per cent, at $67.50, after a five-day bottom hit at $63.72.
"There's a sense that the market got a little bit ahead of itself, and we're seeing some producer buying come in and it's driving the market back up," said Phil Flynn, analyst at the Price Futures Group in Chicago.
Oil is still down about 10 per cent since producer group Opec (Organization of the Petroleum Exporting Countries) decision last Thursday not to cut output despite fears of a supply glut. Both Brent and US crude have fallen for five months in a row, marking the longest losing streak in oil since the 2008-09 financial crisis.
Saudi Arabia, the most influential member of Opec, blocked moves by some smaller producers to curb output. The Saudis argued low prices would ultimately hurt US shale oil production, which analysts say is responsible much of the oversupply now.
Data reviewed by Reuters on Monday suggested the new low-price environment for oil might have started affecting US shale production, with a 15 per cent drop in permits issued for new shale wells in October.
"The market is still looking for a new equilibrium below $70 (a barrel), which is a little surprising given that with the current prices, much of the shale oil production in the US, or part of it, will be unprofitable," Commerzbank analyst Eugen Weinberg said.
