Oil rig count in US fell for 27th week running

Oil prices are beginning the new week of trading down, Brent falling to $63.5 per barrel and WTI dipping below $60 per barrel. The reason for the downswing is the ongoing oversupply: according to the IEA, OPEC is currently producing 1 million barrels of crude oil per day more than will be needed in the second half of the year, says Commerzbank. 

In addition, Saudi Arabia has announced that it plans to further scale up its supply if demand increases. It will therefore only be possible to reduce the oversupply if non-OPEC supply declines, though there is no indication for this to happen at the moment. 

In early June, US crude oil output rose to its highest level in 43 years. The decrease in the oil rig count continued last week for the 27th week running, albeit with noticeably reduced dynamism in recent weeks. Seven more oil rigs were shut down last week. 

However, the lower drilling activity has not yet resulted in any visible fall in US oil production, output having decreased somewhat in only a handful of shale plays. According to official figures, oil production in North Dakota fell slightly to 1.17 million barrels per day in April, having totalled 1.19 million barrels per day in March, notes Commerzbank. The report from the North Dakota Mineral Resources Department also shows that 1,582 oil wells were not used in April, though these can be put back into production at any time. 
In the week to 9 June, speculative financial investors withdrew from WTI for the fourth time in the last five weeks, thereby contributing to the fall in price to below $60 per barrel in the reporting week.