Abu Dhabi: The rise in the number of US oil rigs is expected to be negative on oil prices and this development will put pressure on Opec member countries to extend the production agreement beyond March next year to keep oil prices high, analysts said on Sunday.
According to energy services firm Baker Hughes, US rig count is up nine from last week to 907, with oil rigs up 9 to 738, and gas rigs unchanged at 169.
US rig count is up 339 rigs from last year’s count of 568, with oil rigs going up by 286 and gas rigs by 54, the latest data shows.
Brent futures fell 0.6 per cent or 41 cents, at $63.52 (Dh233.12) per barrel, while US crude West Texas Intermediate was down 0.75 per cent at $56.74 per barrel when markets closed on Friday.
“When they see high oil price, it gives the US an incentive to invest in more rigs and more production so that has a more downward effect on the price and that reinforces Opec’s intent to extend the cuts because it sees the prospect of oversupply more likely in the market,” Jaafar Altaie, managing director at Dubai based Manaar Energy Consulting told Gulf News over phone.
According to him, Opec would rather see lose some market share due to higher US production than see a price go below a certain range.
“At this point of time, most Opec members are not politically confident enough to sustain a low oil price in the short term. They want higher oil prices to sustain their economies.”
Francisco Quintana, head of strategy at Foresight Advisors expects extension of the Opec agreement until at least September 2018.
If Opec does not deliver, prices will fall more than 10 per cent, he told Gulf News by email.
Opec will meet in Vienna on November 30 to take a decision on the extension of the output cut deal.