Oil prices plunge after US shale gas drillers add more rigs

Jessica Morris
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High Oil Prices Continue To Drive Gas Prices Steadily Upwards
Baker Hughes showed the number of active US oil rigs rose by seven to 414 last week (Source: Getty)

Crude tumbled today as investors' nerves were hit by the US shale gas industry's resilience to low prices.

Brent crude, the global benchmark, fell 1.9 per cent to $47.10 per barrel this morning. Its US counterpart, West Texas Intermediate crude, tumbled 2.05 per cent to $44.94 per barrel.

Read more: Opec keeps global oil demand forecast unchanged

It came after data from industry group Baker Hughes showed the number of active US oil rigs rose by seven to 414 last week. The number has risen in 10 of the last 11 weeks, making it the longest streak without rig cuts since 2011.

"This year, each dollar is being used far more efficiently and, as a result, $50 oil appears much more palatable," analysts at Barclays wrote in a note.

"In contrast to last year, producer messaging is no longer about surviving the downturn. This year, producers and service companies almost universally gave the impression that they are well positioned to return to growth mode at much lower prices."

Oil traders also became less confident of higher oil prices, prompting them to cut their net long US crude futures and options positions for the second week in a row last week, according to the US Commodity Futures Trading Commission.

Read more: Opec warns of "lingering concerns" over US and European oil demand

The black stuff has fallen nearly five per cent since 8 September, due to waning expectations for global oil producers to freeze production in a bit to accelerate the stricken market's recovery at a meeting later this month.

The more than two-year oil price rout has been exacerbated by the Organisation of Petroleum Exporting Countries' refusal to cut production. The cartel is trying to defend its market share by pricing out the emergent US shale gas industry.