Oil prices fell yesterday as a rising US rig count stoked fears of global oversupply and after Chinese regulators opened an investigation into suspected stock market manipulation.
US oil drilling increased this week for the first time after 29 weeks of declines, a sign US 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 US 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 0800 GMT, extending a downward trend in place since early May, which has seen prices fall almost 10 per cent.
Front-month US crude was at $56.56, down 37 cents, dropping below a trading range of $57 to $62 seen since early May.
The cartel’s production is close to 2.5 million bpd
“The current US horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays implies that US oil production growth will reach 135,000 barrels per day (bpd) year-on-year” by the fourth quarter of 2015, Goldman Sachs said yesterday.
The rising US rig count adds to near-record production by Russia and the Organisation 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 per cent 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.