Oil Prices Fall as U.S. Rig Count Rises

Oil prices are dropping and on pace to set new multi-month lows Friday as data show U.S. producers are putting more drilling rigs to work despite a lingering world-wide glut.

The number of rigs drilling for oil in the U.S. rose by 5 to 664 this week, oil-field-services firm Baker Hughes Inc. said Friday. Combined with a 20-rig increase last week and larger-than-expected production coming from the Organization of the Petroleum Exporting Countries, the move shows how a glut of oil may persist even though prices are already low, 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 is likely to test its lows for 2015. Production "has really overwhelmed demand even though demand is up."

The U.S. benchmark recently traded down $1.22, or 2.5%, to $47.30 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.05, or 2%, to $52.26 a barrel on ICE Futures Europe, the lowest intraday price since Feb. 2.

The losses put U.S. crude down 20% and Brent nearly 18% lower in July.

High international supplies have kept prices under pressure and increased competition among producers, who are taking cost-cutting measures. But few have ventured to cut production as they all fight to hold on to their customers and continue selling oil, even at lower prices.

Comments by Abdalla Salem el-Badri, secretary general of the Organization of the Petroleum Exporting Countries, on Thursday have done little to reassure the market that the oil glut will be tackled soon. Mr. el-Badri was in Moscow for talks with Russia's energy minister, Alexander Novak.

"OPEC shows absolutely no sign of blinking," said David Hufton, of PVM Oil Associates in London. He said the secretary general believes an increase in oil demand will support prices and will absorb any additional oil exports from Iran. "Unfortunately for OPEC the data, such as it is, does not support this view," he added.

The world will be entering 2016 with a record high level of global stocks, and average surplus is expected to be around 1.5 million barrels a day, he said.

Gasoline futures recently rose 0.6% to $1.839 a gallon. Diesel futures fell 0.9% to $1.5838 a gallon.

Matthew Cowley contributed to this article.

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