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Oil prices drop on continued oversupply woes

Baker Hughes released oil rig count data last Friday. According to the data, five rigs were added back to service in the US. This was the fourth week of additions in the past 34 weeks, bringing the total rig count up to 664.

According to data from Reuters and other sources, OPEC oil output had increased to 32.01m barrels per day (bpd) during the month of July which contributed to the soft prices during the month. As a reference, Brent fell from a high of 59.66 to a low of 51.63. OPEC's July output level is the highest since 2008. Adding to further oversupply is Iraq's record crude exports during the same month of 3.064m bpd (3.02m during June). Iran reported that it expects to raise its oil output by 500k bpd as soon as sanctions are lifted and by 1m bpd within the ensuing months. All these point to weak prices in the months ahead.

For the week ending 31 July, net long futures and options positions in US crude were reduced, according to the US CFTC. This is unsurprising given the large fall in oil prices during the last two sessions of the week.