By Dow Jones Business News, 31 July 2015,
Oil prices fell to new multi-month lows Friday as data showed U.S. producers put more drilling rigs to work despite a lingering world-wide glut.
Many analysts and investors have warned for months that crude production could keep rising even amid massive cutbacks from U.S. producers. U.S. prices have fallen into bear market territory in recent weeks as that scenario has started to play out.
Now U.S. producers are putting more rigs to work. Baker Hughes Inc.’s weekly oil rig count rose by 5 to 664 this week, on top of a 20-rig increase last week. Combined with larger-than-expected production from the Organization of the Petroleum Exporting Countries, the move shows how a glut of oil may persist despite the slide in prices over the past year, 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 prices are likely to test their lows for 2015. Production “has really overwhelmed demand, even though demand is up.”
Money managers have retreated to their weakest bullish stance on oil in nearly five years, adding twice as many bearish bets as bullish bets in the week that ended Tuesday, according to data the Commodity Futures Trading Commission released late on Friday.
News of the added rigs and crude’s continued fall overshadowed signs that U.S. production may have peaked after all. The U.S. Energy Information Administration released data late Friday afternoon showing that the country’s oil production hit a 44-year high of nearly 9.7 million barrels a day in March and has declined to 9.5 million barrels in the two months since. Though the declines have been small, it is the first proof that production has peaked, a data point many traders have been seeking desperately.
The U.S. benchmark settled down $1.40, or 2.9%, to $47.12 a barrel on the New York Mercantile Exchange. Losses accelerated in the afternoon, especially after the rig-count data was released, and landed at their lowest settlement since March 20.
Brent, the global benchmark, fell $1.10, or 2.1%, to $52.26 a barrel on ICE Futures Europe, the lowest settlement since Jan. 29.