Oil Caps Biggest Weekly Drop Since March as U.S. Rig Count Rises

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Crude capped the biggest weekly decline since March after an industry report showed that the number of U.S. oil rigs in use advanced for the first time this year.

The number of active oil rigs in the U.S. rose by 12 to 640 this week, ending the longest decline on record, according to data compiled by Baker Hughes. Futures gained earlier as a government report showed that the U.S. created more than 200,000 jobs for a second month in June.

Oil’s recovery from a six-year low in March has faltered amid speculation the price rally is spurring production and prolonging a surplus. U.S. crude production held near a record of 9.6 million barrels a day last week and OPEC output surged in June to the highest level since August 2012. Negotiations between Iran and world powers have been extended until July 7.

“One week’s data doesn’t make for a change in momentum but this is a dramatic change,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, said by phone. “This does add to overproduction fears.”

West Texas Intermediate for August delivery slipped 3 cents to $56.93 a barrel on the New York Mercantile Exchange. It was the lowest settlement since April 22. Futures dropped 4.5 percent this week. There will be no floor trading Friday because of the July 4 holiday.

Market Share

Brent for August settlement increased 6 cents to end the session at $62.07 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade closed at a $5.14 premium to WTI.

U.S. oil drillers have sidelined more than half the country’s rigs since October as the world’s largest suppliers battle for market share. The crude being pumped out of U.S. shale formations has helped create a global glut that drove prices down 49 percent in the second half of 2014. Traders have been watching the rig counts as they try to determine when U.S. oil production will fall.

The addition of 223,000 jobs in the U.S. followed a 254,000 increase in the prior month that was less than previously estimated, a Labor Department report showed Thursday in Washington. The U.S. jobless rate fell to a seven-year low of 5.3 percent as more people left the workforce.

OPEC Output

The dollar fell from a three-week high after the employment data reduced the outlook for an early interest rate hike by the Federal Reserve. Fed funds futures show there’s a 29 percent chance the central bank will increase its benchmark rate from near zero in September, down from 35 percent on Wednesday, according to data compiled by Bloomberg.

Crude output from the Organization of Petroleum Exporting Countries accelerated last month as Iraq pumped at a record pace, according to a Bloomberg survey. The 12-member group pumped 32.1 million barrels a day in June, an increase of 744,000 a day from May, according to the survey of companies, producers and analysts. Iraqi output surged by 567,000 barrels a day to a record 4.39 million.

Gasoline futures advanced amid higher demand for the fuel. Consumption of the motor fuel averaged over four weeks rose 189,000 barrels a day to 9.54 million, the highest level since September 2007, an Energy Information Administration report showed Wednesday. Gasoline supplies fell 1.76 million to 216.7 million, the least since November.

Gasoline futures for August delivery increased 2.75 cents, or 1.4 percent, to close at $2.0343 a gallon in New York.

The average price for gasoline at the pump advanced 0.4 cent to $2.767 on Wednesday, the first gain in six days, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

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