Oil prices ended lower as a growth in the US rig count intensified worries over the current global oversupply while the market was also unsettled by investigations by Chinese authorities in suspect stock market trading.
Light sweet crude for June delivery ended $1.41 or 2.48% lower at $55.52 a barrel on the New York Mercantile Exchange.
“The pickup in activity might be illustrative of the competitiveness of the U.S. shale industry which, thanks to cutting costs, might have become comfortable with producing oil at prices around $60 per barrel,” Norbert Ruecker, head of commodities research at Julius Baer, told the Wall Street Journal.
“The U.S. shale industry has become the oil market’s swing producer and its responsiveness to prices will shape the market for the years to come, paving the way for lower prices for longer,” he said.
Data from oilfield services provider Baker Hughes showed that the number of active oil rigs in the US rose by 12 to 640 last week to snap 29 weeks of declines,
According to market analysts, the late Thursday report was the strongest indication yet that higher US prices are coaxing producers back to the market stoking concerns that the oil glut will last longer than expected,
Though this is the first rise since the beginning of the year, there are 60% fewer active rigs since hitting a peak of 1,609 active rigs in October 2014.
“One swallow doesn’t make a summer, But other new oil rigs are to be added in the coming weeks, that will cast doubt over the expected decline in U.S. shale oil production,” Analysts at Commerzbank told Market Watch.
“Yet precisely such a decrease is necessary so that the oversupply on the global oil market can be reduced and oil prices can further recover.”
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