Oil Drops on Rising U.S. Rig Count
LONDON, July 3 (Reuters) – Oil prices fell on Friday as a rising U.S. rig count stoked fears of global oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation.
U.S. oil drilling increased this week for the first time after 29 weeks of declines, a sign U.S. oil production may start to increase more strongly again after a slowdown due to a period of low oil prices.
Oil rigs increased by 12 to 640 following a slump that cut the number of active U.S. rigs from a peak of 1,609 in October to a nearly five-year low last week, energy services firm Baker Hughes Inc said.
"This is the first weekly increase in 30 weeks and is an indication that the slump in drilling activity has ended," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
"Oil prices have retreated on that news," Fritsch told Reuters Global Oil Forum.
Brent crude for August was down 45 cents at $61.62 a barrel by 1020 GMT, extending a downward trend in place since early May, which has seen prices fall almost 10 percent.
Front-month U.S. crude was at $56.56, down 37 cents, dropping below a trading range of $57 to $62 seen since early May.
"The current U.S. horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays implies that U.S. oil production growth will reach 135,000 barrels per day (bpd) year-on-year" by the fourth quarter of 2015, Goldman Sachs said on Friday.
The rising U.S. rig count adds to near-record production by Russia and the Organization of the Petroleum Exporting Countries, which is feeding a huge oversupply.
OPEC oil supply was at a three-year high due to record or near-record output from Iraq and Saudi Arabia, a Reuters survey showed this week. The cartel's production is close to 2.5 million bpd above demand, filling stocks worldwide.
The Greek economic and debt crisis and concerns over China's commodities markets weighed on investor sentiment.
Traders said commodity markets were also worried by reports that China's regulators had opened an investigation into suspected market manipulation after a slump of more than 20 percent in Chinese stocks since mid-June.
On Thursday, Shanghai's benchmark composite index fell below 4,000 points for the first time since April – a key support level that analysts had expected Beijing to defend.
(Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by Dale Hudson)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds