Oil dives 4 percent on the week on U.S. rigs rise, glut threat

By Barani Krishnan

NEW YORK (Reuters) – Oil prices settled lower on Friday, losing 4 percent on the week, after the fourth weekly rise in the U.S. oil rig count added to worries about a global crude glut.

Crude futures were already down, with Brent at two-month lows, on fears of more Iraqi supply before a report by energy services firm Baker Hughes showed U.S. oil drillers added 14 rigs this week to bring the total rig count to 371.

“The oil complex is already struggling with oversupply issues. More than ample inventories and upcoming refinery turnarounds and maintenance have the bulls on the defensive,” said Pete Donovan, broker at Liquidity Energy in New York.

“An increase in rigs is the last thing they need.”

Brent settled down 51 cents, or 1.1 percent, at $45.69 a barrel, after falling to $45.17, the lowest since May 11. For the week, Brent lost 4 percent.

U.S. West Texas Intermediate (WTI) crude closed down 56 cents, or 1.3 percent, at $44.19. It fell 3.8 percent on the week.

The dollar’s rally to a more than four-month high also hurt demand for greenback-denominated oil among holders of the euro and other currencies.

Iraq’s oil exports were expected to rise in July, according to loading data and an industry source. If confirmed, it would put OPEC’s No. 2 producer back on track for supply growth after a two-month lag.

“These large and increasing stocks will not only up the likelihood of additional commercial short hedges, but will also encourage the commercials to defer long hedges,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Earlier this week, the U.S. government reported that domestic crude inventories were at 519.5 million barrels last week, historically high for this time of year, even after a ninth straight week of drawdowns.

On Thursday, traders said market intelligence firm Genscape reported a build of 725,176 barrels in the latest week at the Cushing, Oklahoma delivery point for U.S. crude futures.

Falling oil prices have encouraged traders to send U.S. supplies to Europe, counterbalancing 700,000 barrels per day in lost Nigerian supply..

U.S., European and Asian oil product stocks rose 2.35 million barrels last week for a second week of growth.

“The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion,” UBS oil analyst Giovanni Staunovo said.

(Additonal reporting by Libby George in LONDON and Keith Wallis in SINGAPORE; Editing by Marguerita Choy and David Gregorio)