Oil prices dip on stronger US$, rig count rise

New York

OIL prices fell slightly on Friday as traders balanced a stronger US dollar and another increase in the US oil rig count against expectations that more Opec talk of output cuts will keep crude above US$50 per barrel.

The US dollar posted its best weekly performance in more than seven months against a basket of currencies, weighing on prices of greenback-denominated commodities, including crude oil.

A closely watched report by oil services provider Baker Hughes, meanwhile, showed that US drillers added four rigs in the week to Oct 14. It was the 16th week in a row that oil drillers had gone without making cuts, indicating more production to come.

Despite that, oil prices fell just slightly.

Brent, the London-traded crude benchmark, settled down eight US cents, or 0.2 per cent, at US$51.95 a barrel. For the week, it closed flat.

US West Texas Intermediate (WTI) crude ended down nine US cents at US$50.35. It rose about one per cent on the week. "There's no big news to drive the market," said Phil Flynn, analyst at Chicago brokerage Price Futures Group.

He described the oil rig count rise of four as "anti-climatic." Most analysts have said that rigs need to rise by at least 10 in a week to have a sustained bearish impact on prices.

For now, many think that prices could continue rising in the near term on expectations related to output cuts proposed by Opec.

Oil prices have trended higher since Sept 27, with Brent gaining about 13 per cent and hitting one year highs above US$53, after the Organization of the Petroleum Exporting Countries announced its first planned output cut in eight years.

Opec plans to rein in a global supply glut that forced crude to crash from mid-2014 highs above US$100 and has asked other major producers, including Russia, to join in cutting output. "Between now and November, what Opec will be trying to do is a lot of jawboning to move prices higher and the market is likely to respond," said Jim Williams at consultancy WTRG Economics in London, Arkansas.

In Thursday's trade, both Brent and WTI rose, continuing their recent upward momentum, despite the US government reporting the first domestic crude inventory build in six weeks. Market participants had focused then on larger-than-expected drawdowns in diesel, gasoline and other fuel stockpiles reported by the US Energy Information Administration. REUTERS