Crude prices fall from 2016 highs as US oil rig count rises

The Pak Banker - - MARKETS/SPORTS -

Crude oil prices set­tled lower af­ter the U.S rig count rose for the first time since De­cem­ber, re­new­ing wor­ries of a sup­ply glut af­ter an out­put freeze pro­posal helped boost the mar­ket to 2016 highs and mul­ti­week gains.

US en­ergy firms this week added one oil rig af­ter 12 weeks of cuts, ac­cord­ing to data by in­dus­try firm Baker Hughes. The ad­di­tion, com­ing af­ter oil rigs had fallen by two-thirds over the past year to 2009 lows, showed crude drilling pick­ing up again af­ter a 50 per­cent price rally since Fe­bru­ary.

"The rig count and crude prices have a di­rect re­la­tion­ship for sure," said Pete Dono­van, bro­ker at Liq­uid­ity En­ergy in New York. Brent crude LCOc1 fin­ished down 34 cents, or 0.8 per­cent, at $41.20 a bar­rel, hav­ing risen $1 ear­lier to a 2016 high of $42.54.

U.S. crude CLc1 set­tled down 76 cents, or 1.9 per­cent, at $39.44, af­ter also gain­ing $1 to a year high of $41.20. It con­tin­ued to fall in post-set­tle­ment trade, los­ing nearly $1.

De­spite the re­treat, oil posted mul­ti­week gains, with Brent up for a fourth straight week and U.S. crude a fifth week in a row. Both bench­marks rose about 2 per­cent this week.

over­sup­ply in oil had knocked crude prices down from mid-2014 highs above $100 a bar­rel to 12-year lows ear­lier this year, bring­ing Brent to around $27 and U.S. crude to about $26.

Over the past two months, prices ral­lied to above $40 af­ter the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries (OPEC) floated the idea of a pro­duc­tion freeze at Jan­uary's highs.

The com­bi­na­tion of de­clin­ing oil out­put, smaller crude stock­pile builds and surg­ing gaso­line con­sump­tion in the United States also helped the re­cov­ery, al­though some an­a­lysts said the rally had been over­done. "The mar­ket is prob­a­bly too long here and needs a cor­rec­tion," said Scott Shel­ton, en­ergy fu­tures bro­ker with ICAP in Durham, North Carolina.

Money man­agers raised their bullish bets on U.S. crude to a five-month high dur­ing the week to March 15, data from the U.S. Com­mod­ity Fu­tures Trad­ing Com­mis­sion showed.

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