Oil prices fall as Saudis could boost output

Oil prices fell Friday despite a drop in the US rig count following news that Saudi Arabia could further boost output in an already glutted market.

US benchmark West Texas Intermediate for July delivery shed 81 cents to $59.96 a barrel on the New York Mercantile Exchange.

European benchmark Brent oil for July delivery fell $1.24 to $63.87 a barrel in London.

The US oil rig count dropped by seven to 635 in the week ending June 12, according to Baker Hughes. The rig count is down nearly 60 percent from a year ago.

However, Matt Smith, analyst at ClipperData, said the cutback in drilling is “not necessarily a bullish thing” given that US production has continued to rise despite a lower rig count.

Analysts pointed to comments from Saudi Aramco executive Ahmed al-Subaey, who said in India that the world’s biggest oil exporter may increase production further from record levels to meet demand. Aramco is in talks with Indian buyers to supply more oil, Subaey told Reuters.

The pledge of potentially higher Saudi production “has really put the market on its back,” said Smith.

Commerzbank said the Saudi stance would mean that “the only way for the market to tighten is if non-OPEC supply were reduced.”

“The key factor will therefore be whether US oil production begins falling as anticipated by the US Energy Information Administration. If not, the ongoing oversupply is likely to continue weighing on prices in the second half year too.”