Oil Ends Down For Third Week As US Rig Count Rises

Reuters

NEW YORK, Dec 18 (Reuters) - Oil prices fell about half a percent on Friday after the U.S. oil rig count unexpectedly rose for the first time in five weeks, pressuring a market already at seven-year lows.

Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures settled down for a third straight week. With two weeks to the year-end, both were slated to finish 2015 down about 35 percent on a rout driven by oil oversupplies.

Despite the severity of the decline, data from oil services company Baker Hughes Inc showed U.S. energy firms added to the number of oil rigs in operation this week, indicating more supply to come. The closely watched report showed 17 new rigs that brought the total to 541.

"The rig count increase was a bit of a surprise," said Peter Donovan, broker at Liquidity Energy in New York. "I don't think it was a coincidence that the market fell after the report."

WTI hit $34.29 a barrel, the lowest since February 2009, after the release of the Baker Hughes' report. It settled the day down 22 cents, or 0.6 percent, at $34.73. For the week, WTI lost 2.5 percent.

Brent finished the session down 18 cents, or 0.5 percent, at $36.88. Its session low was $36.41, just 21 cents above a 2004 bottom. Brent lost 3 percent on the week.

Some oil bears said they were actually counting on a price rebound that would let them make a bigger profit selling the market down.

"I'm quietly waiting for a bigger covering bounce that will presage the next leg lower in WTI," said Tariq Zahir, a trader in crude oil spreads at New York's Tyche Capital Advisors who was betting on a price of $30 or lower.

Hedge fund manager Pierre Andurand estimated $25 or less by first quarter.

Some did not think the higher rig count would have much impact on prices.

"Rig activity still remains at very depressed levels and a slight uptick in the data point isn't going to change that," said Chris Jarvis of oil consultancy Caprock Risk Management in Frederick, Maryland. "This just shows there are a few oil companies in a position to capitalize on low drilling costs."

Trading volumes were thin, in line with reduced activity ahead of Christmas and the New Year. Just around 80 million barrels of WTI were traded, versus nearly 200 million on Friday, Reuters data showed.

(Addtional reporting by Karolin Schaps in London; Editing by Chris Reese and Richard Chang)

Copyright 2015 Thomson Reuters.

Copyright 2016 Thomson Reuters. Click for Restrictions.

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Brent Crude Oil : $54.33/BBL 0.81%
Light Crude Oil : $51.5/BBL 1.29%
Natural Gas : $3.75/MMBtu 1.35%
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