Oil ends down for third week as US rig count rises

23 Dec 2015 | Author: | No comments yet »

Energy Companies Added Oil Rigs Last Week Despite Rock-Bottom Crude Prices.

US benchmark West Texas Intermediate for January delivery dropped US$0.22 to US$34.73 a barrel on the New York Mercantile Exchange, a fresh low since February 2009. Weeks of declines in the number active oil rigs in the U.S. ended on Friday, after drillers added 17 rigs in the past week, according to data from Baker Hughes. The Baker Hughes US oil rig count showed an increase of 17 for the week ending Friday to 541 rigs, data that stokes concern that production will stay high.

This was only the third, double-digit increase in the count of oil rigs this year, with nearly 1,070 oil rigs having been shut down since peaking at 1,609 rigs in Oct. 2014. Kyle Cooper of IAF Advisors said the gain in the drilling rigs should be seen in the context of the count already being “very low” compared with last year’s 1,536. The United States Oil fund (USO) declined 0.4% to $10.70, while the iPath S&P GSCI Crude Oil Total Return Index exchange-traded note (OIL) declined by 0.3%. Oil prices have fallen from more than US$100 a barrel in July last year due to high output from the US and key members of the OPEC, which has not cut output in response to the rout. The global supply glut that brought prices close to 11-year lows this week means Brent will post losses for a third consecutive year, the first time that has happened since exchange-based oil trading started in the 1980s.

Even with global surpluses and slowing economies keeping prices low for everything from crude oil to wheat, demand might weaken, especially from major importers in Asia like China and India, which have been key drivers of commodity buying. “The currency movement due to the US rate increase will have a direct impact on our business,” said Kazuo Kagami, the president of Toho Titanium Co, which makes a lightweight, super-strong alloy used in everything from airplane parts to golf clubs. The total rig count was unchanged at 709 this week after drillers shut down 17 natural gas rigs, the biggest decline in gas rigs since the week of Jan. 16. Traders were preparing for even lower crude prices next year by taking up more put options to sell U.S. crude in February should prices fall to $30, $25 or even $20 per barrel, according to Reuters data. “I think everyone’s assumptions heading into the first quarter of next year was that there was going to be some sort of agreement on how to accommodate Iranian barrels. Russia, one of the world’s top oil producers, said on Friday it was not considering coordinating its output policy with OPEC members, adding the organization was not exerting as much influence as it did in the 1970s and 1980s. Even though the number of active rigs have come down substantially over the past year, “production has not come off in a meaningful way at all.” Earlier, Zahir had mentioned that light trading volume as the market heads toward the Christmas holiday and end of the year could be a recipe for big swings in crude prices “in weird directions.” A combination of traders unwinding bets that oil will fall at the end of the year and investors shedding oil for tax reasons contribute to the volatility, he said.

Data provider Genscape Inc. said stockpiles at Cushing, Okla., the delivery point for the benchmark U.S. futures contract, rose by nearly 1.4 million barrels in the week that ended Tuesday.

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