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Oil down 3% as US drillers add rigs, strong dollar weighs
[NEW YORK] Oil prices fell about 3 per cent on Friday after data showing the US oil drilling rig count rising for a second week in row and a stronger dollar weighed on demand for greenback-denominated crude futures.
A slide in equity prices on Wall Street also pressured futures of Brent and US crude's West Texas Intermediate (WTI).
The dollar rose more than half a per cent, its largest gain in a month, as jittery global financial markets sent investors towards safe haven currencies.
Brent's front-month fell US$1.43, or 2.8 per cent, to US$50.52 a barrel by 2:14 pm EDT (1814 GMT), after setting a session low at US$50.40. On Thursday, it hit a 2016 high of US$52.86.
WTI's front-month traded down US$1.62, or 3.2 per cent, to US$48.94 a barrel, after a session low at US$48.90.
Brent and WTI, however, remained on track for weekly gains of about 2 and 1 per cent respectively, helped by a three-day rally earlier in the week that boosted the North Sea benchmark to an eight-month peak and WTI to the highest since July.
Despite Friday's retreat, crude futures were still up almost double from 13-year lows hit during the winter, helped by supply disruptions from Nigeria, Canada, Libya and Venezuela, combined with lower US production. Worries of a global crude glut had earlier caused prices to collapse from above US$100 a barrel to below US$30.
US oil drillers added three oil rigs in the week to June 10, after a nine-rig rise in the previous week, oil services firm Baker Hughes said in its weekly survey of the rig count.
"This looks like the beginning of a trend that will translate to the slowing down of US crude production declines," said Tariq Zahir, who trades WTI futures spreads for Tyche Capital Advisors in New York.
"I'm adding to my short positions in spreads." But some market sources said unless the rig count climbed exponentially in the coming weeks, the market was likely to shrug off the data.
Before this week, oil rigs fell on average by 10 per week this year. Last year, they slumped by an average of 18 a week as low crude prices made it uneconomical to drill.
"The 10-15 rig rise we've had so far won't change anything significantly on supply. At this point, it's hard to get to excited about an uptick in production coming this year," said Scott Shelton, energy broker with ICAP in Durham, North Carolina.