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Crude Oil Sinks on Monday as US Oil Rig Count Continues to Grow

January 9, 2017 at 18:20 by Vladimir Vyun

Futures for crude oil sank today amid concerns that the rising number of US oil rigs will erase the impact that the production cut of the Organization of Petroleum Exporting Countries had on global supply and oil markets. Baker Hughes reported that the US oil rig count increased by 4 last week, reaching the level not seen in over a year. It was the tenth consecutive weekly increase. While oil prices demonstrated substantial rally after the OPEC deal, analysts argued that it was self-defeating as higher prices encourage US producers to ramp up supply, and that in turn damps hopes smaller oversupply on the market.

Adding to the problems of crude was the news that Iran was boosting its oil exports. The country was exempt from the OPEC production cut agreement and is now trying to regained markets it has lost due sanctions from Western nations (which were lifted last year).

The fact that Russia has reduced its oil production should have been positive for crude, but at the present time the commodity showed no reaction to the news, which was most likely overshadowed by bearish factors.

February futures for delivery of WTI crude oil sank 2.94% to $52.40 per barrel as of 18:06 GMT on NYMEX today. March contract for Brent crude declined as much as 2.92% to $55.43 per barrel on ICE.

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