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Data shows a record 22nd consecutive week of increases in the number of US oil rigs.
Data shows a record 22nd consecutive week of increases in the number of US oil rigs.

Zanganeh Says Higher US Output Impairs Int’l Crude Prices

Zanganeh Says Higher US Output Impairs Int’l Crude Prices

Oil Minister Bijan Namdar Zanganeh says the downward trend in global oil prices stems from an upsurge in the United States shale oil production.

"They (US producers) have added more than 900,000 barrels to their daily output in the last few months, which was bigger than OPEC forecasts," Zanganeh said on the sidelines of a Cabinet meeting in Tehran on Wednesday, Shana reported.

Oil fell to seven-month lows on Wednesday and was set for its largest price slide in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by OPEC and non-OPEC producers with a deal to cut global output.

August Brent crude futures were down 12 cents at $45.85 a barrel, after falling nearly 2% in the previous session to their lowest settlement since November. US crude futures for August were down 7 cents at $43.44, having hit their lowest since September on Tuesday.

In the US, data on Friday showed a record 22nd consecutive week of increases in the number of US oil rigs, bringing the count to 747, the most since April 2015. Analysts say any rise in crude prices would be short-lived as higher prices will prompt US drillers to bring more rigs back online.

This year, shale oil output is forecast to increase by up to 1 million barrels per day to more than five million, or almost 10% of the country's total crude output.

Last month OPEC and non-members led by Russia decided to extend an agreement to cut 1.8 million barrels in daily output by nine months to March 2018 as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.

So far this year, oil has lost 20% in value, its worst performance for the first six months of the year since 1997.

According to the minister, some OPEC and non-OPEC members including Saudi Arabia and Russia are optimistic about the rise in prices in the coming months.

Pointing to the fact that it is too early to see the effect of OPEC's decision to extend the cuts by March next year, Zanganeh noted, "Achieving consensus to reduce production is difficult, yet we need to wait and see how the market will react to low prices in the next few weeks."

The price fall comes as OPEC and non-OPEC producers have over-complied with the output cut. OPEC compliance with the curbs was 108% non-OPEC compliance was 100% in May, according to a source familiar with the matter, Reuters reported Tuesday. Another source confirmed compliance by all producers in May was 106%.

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