The U.S. oil producers have added rigs in their operations for a 20th consecutive week, raising concerns that 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. The new agreement extends the production deal for nine months until March 2018.

Despite the agreement, the oil price suffered a major selloff on that day and was down around 3 percent by the end of the day. It recovered somewhat on the next day but was still down for the week and also in the following week. WTI is currently trading at $48.1 per barrel and Brent at $2.3 per barrel premium to WTI. The increased production and an increase in the numbers of operating rigs remain a concern for the oil bulls.

The report from Baker Hughes shows that the numbers of operating rigs in the United States rose for the 20th consecutive week. In the last week, there was an increase of 11 operating rigs in the US, pushing the total number to 733, the highest since April 2015. A separate report showed that US oil production has reached 9.34 million barrels per day for the week ending on 26th May, which is the highest level of production since August 2015. The production has increased by 914,000 barrels per day since bottoming around last July.