The U.S. oil producers have added rigs in their operations for 23 consecutive weeks, raising concerns that the U.S. shale oil producers which were able to cut their production cost dramatically over the past years are now a low-cost global competitor and would continue to undermine the OPEC agreement to cut supplies. Last month, OPEC producers and 11 participating non-OPEC countries including Russia formally ratified the agreement first drafted last November to cut supplies by 1.76 million barrels per day for an extension. The new agreement extends the production deal for nine months until March 2018. However, the latest oil market report from OPEC showed that production increased by 336,000 barrels in May, thanks largely to two exempted countries, Libya and Nigeria.

Despite the agreement, the oil price has suffered a major selloff on the day of the agreement and was down around 3 percent by the end of the day. It is still continuing on its downward trajectory. Since the deal was ratified, the oil price (WTI) has declined more than 15 percent. The North American benchmark WTI is currently trading at $43.6 per barrel and Brent at $2.6 per barrel premium to WTI. The increased production in the U.S. and an increase in the numbers of operating rigs remains the biggest of concerns for the oil bulls.

The report from Baker Hughes shows that the numbers of operating rigs in the United States rose for the 23rd consecutive week. In the last week, there was an increase of 11 operating rigs in the US, pushing the total number to 758, the highest since April 2015. A separate report showed that U.S. oil producers are pumping at 9.35 million barrels per day, which is the highest level of production since August 2015. The production has increased by 922,000 barrels per day since bottoming around last July. The International Energy Agency (IEA) recently forecasted that production is set to rise by 920,000 barrels in 2017 alone and by 780,000 barrels per day in 2018.