By Barani Krishnan
Investing.com – Oil prices settled lower on Friday after data showed the U.S. rig count jumped double digits this week, suggesting crude drillers in the world’s largest producing country were adding to output despite a questionable demand outlook amid the coronavirus pandemic.
Rigs actively drilling for oil in the United States stood at 183 this week, versus last week’s all-time low of 172, oil services firm Baker Hughes said in its routine survey.
Baker Hughes had not reported a single oil rig addition since February, even before the coronavirus outbreak in the United States which decimated demand for energy. It has been more than a year since there was a double-digit rise in rigs.
The surge in rigs suggest that U.S. oil drillers were getting comfortable with crude prices at around $40 per barrel.
History has shown that rig additions, once they begin, can quickly rise in shale oil patches. The result typically is higher production than the market can bear, a phenomenon that ultimately weighs on crude prices. The U.S. oil rig count stood as high as 1,606 in 2014, triggering a price crash that took crude to around $25 per barrel two years later from previous highs above $100.
In Friday’s trade, New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled down 48 cents, or 1.1%, at 42.34 per barrel.
London-traded Brent, the bellwether for global crude prices, fell 55 cents, or 1.2%, to close the New York session at $44.35.
For the week, WTI rose 0.8% while Brent fell 1%.
Even before the Baker Hughes data release, crude prices were trading down on the day on reports of a ceasefire in oil-rich Libya — a development that looked set to increase global production and ruin OPEC’s 97% compliance rate on an oil production cut agreement.
OPEC, or the Organization of the Petroleum Exporting Countries, has 13 members led by Saudi Arabia. It also has 10 non-members allies that include Russia. It announced this week that demand for oil could be slower than expected, despite production cuts by its enlarged OPEC+ group.
Oil Ends Down as U.S. Rig Count Jumps Double-Digits
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