Oil prices drop as falling drilling activity fails to dent US crude inventory buildup

Crude oil futures witnessed mixed trade on 20 February, but finished lower for the week, after data showed that falling drilling activity in the US, the leading consumer, did nothing to dent the inventory buildup there.

Brent April contract finished nearly unchanged at $60.22 a barrel on Friday.

The global benchmark lost 2% for the week as a whole.

US March contract finished 1.6% lower at $50.34 a barrel on Friday.

WTI crude dropped 4.6% for the week.

Oil prices were pulled down by US data.

Baker Hughes reported that the number of US rigs actively drilling for oil and natural gas as of Friday, fell by 48 to 1,310, but supply data released earlier in the week showed that stockpiles grew.

Commerzbank Corporates & Markets said on Friday that lower US oil production "does nothing to change the considerable oversupply on the oil market in the short term, however, which is also why US crude oil stocks are continuing to grow massively.

"According to the US Department of Energy, they increased last week by an additional 7.7 million barrel to reach a new record level - what is remarkable is that this happened despite lower imports. On the other hand, US crude oil production continued to rise, achieving its highest level since 1973."

Commerzbank added: "The crude oil inventory build has totalled more than 43 million barrels in the last six weeks. Last week saw oil stocks at Cushing surge by 3.7 million barrels, which marks their third-strongest weekly increase since the data series began nearly 11 years ago.

"Cushing stocks have doubled within just three months and currently find themselves at their highest level since July 2013. We therefore see downside potential for the oil prices. What is more, the price gap between Brent and WTI, which has already increased significantly in recent weeks, is likely to widen even further on the back of stock trends in the US."

Earlier in the week, an American Petroleum Institute (API) report showed that US crude supplies as of the week ended 13 February jumped a shocking 14.3 million barrels over the preceding week.