The number of active drilling rigs in the United States increased by 13 to 1,057, or 108 more than this time last year, according to the weekly data released by Baker Hughes on Friday, reports Xinhua from Houston.
The prices of the West Texas Intermediate (WTI) for September delivery and Brent for October delivery decreased 1.49 per cent and 0.65 percent, respectively, in the week ending Aug. 10.
The Houston-based oilfield services company Baker Hughes reported that the number of active oil rigs increased by ten to 869 this week, with more than half of oil rigs, or 485, located in Permian Basin region of western Texas and southeastern New Mexico. The number of gas rigs increased by three, hitting 186, and miscellaneous rig count remained the same as 2 rigs in the week.
Analysts were surprised that five rigs were added in the Permian Basin despite the big price differential between Midland and WTI due to pipeline bottlenecks. They considered the pipeline bottlenecks as a big threat against production growth of the Permian Basin.
Most of the oil production growth in the United States comes from the Permian Basin and that supply needs to be transported somehow to the Gulf refineries or to the ports in order to be exported.
Canada's total rig count declined by 14 to 209 in the week. Canada's oil rig counts declined by twelve and its gas rig counts declined by two this week. Canada's oil and gas rig count is now down by 11 year on year. Oil rigs were up by 13 year on year in Canada, while the number of gas rigs was down by 24.
Analysts attributed the major decline in the Canadian gas rig counts to the very low gas prices on the Canadian natural gas spot market. The natural gas producers prefer curtailing their production rather than increasing in the current depressed market.
Oil prices were pressured on Wednesday as the US Energy Information Administration (EIA) reported a build in the crude oil inventories. Also, the trade tensions between the United States and China intensified as both sides released the coverage of their new tariffs. Pressured by those negative factors, WTI and Brent declined by 3.11 per cent and 3.02 per cent, respectively, on Wednesday.
Matthew Smith, the director of commodity research at ClipperData in Houston, Texas, told the news agency that "crude has continued on a gradual bearish path lower in the last week, weighed down by trade war concerns."
Last week, tensions between the US and Chinese trade officials intensified. China said on Wednesday it would retaliate against the latest round of US tariffs on Chinese imports.
China's announcement came after the US Trade Representative's office released a finalized list of 16 billion dollars' worth of Chinese goods. The tariff hike will take effect on Aug. 23, bringing the total worth of Chinese goods facing a 25 per cent tariff to 50 billion dollars.
Another negative factor that pressures the oil prices is the stronger US dollar. US dollar Index resumed its upward movement and reached its highest levels within the last 52 weeks. Now the index is above 96 level.
Anas Alhajji, an energy economist based in Dallas, Texas, told Xinhua that "the main threat for growth in global demand this summer is the rising US dollar."
US dollar index is a measure of the value of the US dollar relative to a basket of foreign currencies. Oil is mostly traded in US dollars all over the world and a stronger US dollar pressures the oil demand.