Oil falls below $59 after big jump in US rig count, on track for worst week since Jan 2016

A crushing oil price rout extended into a sixth day, with U.S. crude falling below $59 a barrel for the first time this year, as rising production, a strong dollar and a broad financial asset sell-off combined to weigh down the market.

The drubbing started last Friday and gathered steam this week, putting U.S. West Texas Intermediate crude on pace for its worst weekly performance since January 2016.

U.S. crude plunged $2.18, or 3.6 percent, at $58.97 a barrel by 1:06 p.m. ET, after hitting a more than six-week intraday low just above $59.

Brent crude dropped $2.12, or 3.3 percent, to $62.69, just above an eight-week low struck at the bottom of the session.

For the week, U.S. crude is down 9.9 percent, while Brent has fallen 8.6 percent.

The U.S. oil rig count rose by 26 rigs to a total of 791, Baker Hughes reported on Friday.

The week’s losses accelerated on Wednesday after government data showed weekly U.S. production jumping to a record 10.25 million barrels a day. Meanwhile, the nation’s stockpiles of crude rose for a second straight week.

With American output on the rise, concerns are creeping into the market that OPEC’s deal with Russia and other major producers to limit supply could come under pressure, said John Kilduff, founding partner at energy hedge fund Again Capital.

The head of Russian energy giant Gazprom Neft on Friday said producers could adjust their commitments under the deal as soon as next quarter, Reuters reported. Gazprom CEO Alexander Dyukov said he hoped producers would agree to raise output since the market has balanced after years of oversupply.

“It goes to the sense that folks are getting antsy about the production scheme holding together,” he said.

Meanwhile, the dollar index is holding above 90 cents, putting pressure on commodities. A stronger greenback makes it more expensive for holders of other currencies to buy dollar-denominated commodities like oil.

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