Oil Prices Drop Again After Increase in U.S. Oil Rigs

While oil prices had gained some momentum in recent days due to the extension of the production cut agreement by 24 countries, including OPEC, until the end of next year, reports of an increase in oil drilling rigs in the U.S. have caused black gold prices to drop again. According to a report by Reuters on Monday, December 4, the prices of U.S. benchmark oil and Brent fell by 0.8% to 0.4% today. The reason for this decline is the reports of an increase in two oil drilling rigs in the U.S., bringing the number of active rigs in the country to 749, the highest level since September. Reuters notes that last year, the total number of drilling rigs in the U.S. was about 477, but the improvement in global oil prices has encouraged U.S. oil producers to increase their output. Meanwhile, OPEC, along with other oil-producing countries, decided on December 9 to extend the daily production cut of 1.8 million barrels until the end of next year to curb excess oil production in the world and raise prices. U.S. oil production is expected to reach 10 million barrels per day by the end of this year, which would be unprecedented in the history of the U.S. oil industry. This figure is also expected to grow in the coming years. In the new agreement to extend the production cuts, OPEC has added a clause stating that if global oil markets reach balance, the signatory countries can exit the agreement before the end of 2018. In this context, Reuters reported another statement on Monday from Khalid al-Falih, Saudi Arabia's Minister of Oil, stating that the signatory members of the oil production cut agreement will adhere to the agreement in the second half of the year unless demand significantly exceeds supply, disrupting the market. After meeting with his U.S. counterpart, Rick Perry, he said that in such a case, there is a massive amount of excess oil capacity in these countries that could enter the market. Reuters also quoted Perry as saying that OPEC can make its decisions, and the U.S. can determine its energy policies based on existing market factors.