U.S. oil prices fell below $50 a barrel on Friday as U.S. drilling data showed an uptick in activity.
Oil prices have rallied by about 90 percent since hitting decade lows this year after supply outages around the world fueled expectations that the global oversupply of crude would shrink faster than expected.
However, some market watchers warn that the sharp rally could encourage producers to increase output, keeping the market oversupplied.
U.S. oil for July delivery settled down $1.49, or 2.9 percent, at $49.07 a barrel on the New York Mercantile Exchange. The contract rose 0.9 percent this week.
Brent, the global benchmark, fell $1.41, or 2.7 percent, to $50.54 a barrel on ICE Futures Europe. Prices rose 1.8 percent on the week.
The number of rigs drilling for oil in the U.S. rose by three this week, the second straight increase, Baker Hughes Inc. said Friday.
Domestic production has declined in recent months as low oil prices prompted companies to cut spending on new drilling. But with prices now at levels that make drilling economical for some firms, analysts say the rig count might continue to rise and U.S. production declines might slow. This could, in turn, threaten the price recovery.
“U.S. production should at least stabilize out and not continue going lower,” said Tariq Zahir, managing member of Tyche Capital Advisors. “It’s the beginning of a trend, and if it continues to happen … I think the risk is to the downside” for prices, he said.
Harold Hamm, chief executive of Continental Resources Inc., told Bloomberg News late Thursday that his company has started completing its backlog of previously drilled wells, which should add new production to the market.
Still, analysts say that a spate of supply outages from Nigeria to Canada will continue to support prices. Disruptions have taken more than 3 million barrels off the oversupplied market in recent weeks.
Gasoline futures fell 5.9 cents, or 3.6 percent, to $1.5596 a gallon, a one-month low. Prices lost 3 percent this week.
Diesel futures fell 3.52 cents, or 2.3 percent, to $1.5160 a gallon Friday but rose 1.9 percent on the week.
