Oil prices are dropping and on pace to set new multi-month lows
Friday as data show U.S. producers are putting more drilling rigs
to work despite a lingering world-wide glut.
The number of rigs drilling for oil in the U.S. rose by 5 to 664
this week, oil-field-services firm Baker Hughes Inc. said Friday.
Combined with a 20-rig increase last week and larger-than-expected
production coming from the Organization of the Petroleum Exporting
Countries, the move shows how a glut of oil may persist even though
prices are already low, analysts said.
"It's just one more thing that adds to that bearish feel to the
market," said John Saucer, vice president of research and analysis
at Mobius Risk Group in Houston. He said oil is likely to test its
lows for 2015. Production "has really overwhelmed demand even
though demand is up."
The U.S. benchmark recently traded down $1.22, or 2.5%, to
$47.30 a barrel on the New York Mercantile Exchange. Brent, the
global benchmark, fell $1.05, or 2%, to $52.26 a barrel on ICE
Futures Europe, the lowest intraday price since Feb. 2.
The losses put U.S. crude down 20% and Brent nearly 18% lower in
July.
High international supplies have kept prices under pressure and
increased competition among producers, who are taking cost-cutting
measures. But few have ventured to cut production as they all fight
to hold on to their customers and continue selling oil, even at
lower prices.
Comments by Abdalla Salem el-Badri, secretary general of the
Organization of the Petroleum Exporting Countries, on Thursday have
done little to reassure the market that the oil glut will be
tackled soon. Mr. el-Badri was in Moscow for talks with Russia's
energy minister, Alexander Novak.
"OPEC shows absolutely no sign of blinking," said David Hufton,
of PVM Oil Associates in London. He said the secretary general
believes an increase in oil demand will support prices and will
absorb any additional oil exports from Iran. "Unfortunately for
OPEC the data, such as it is, does not support this view," he
added.
The world will be entering 2016 with a record high level of
global stocks, and average surplus is expected to be around 1.5
million barrels a day, he said.
Gasoline futures recently rose 0.6% to $1.839 a gallon. Diesel
futures fell 0.9% to $1.5838 a gallon.
Matthew Cowley contributed to this article.
Write to Timothy Puko at tim.puko@wsj.com and Biman Mukherji at
biman.mukherji@wsj.com
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