Crude prices settled lower yesterday after the US oil rig count rose for the first time since December, renewing worries of a supply glut after an output freeze plan helped boost the market to 2016 highs and multiweek gains.

US energy firms this week added one oil rig after 12 weeks of cuts, according to data by industry firm Baker Hughes. The addition, coming after oil rigs had fallen by two-thirds over the past year to 2009 lows, showed crude drilling picking up again after a 50 per cent price rally since February. "The rig count and crude prices have a direct relationship for sure," said Pete Donovan, broker at Liquidity Energy in New York.

Brent crude finished down 34 cents, or 0.8 per cent, at $41.20 a barrel, having risen $1 earlier to a 2016 high of $42.54. US crude settled down 76 cents, or 1.9 per cent, at $39.44, after also gaining $1 to a year high of $41.20.

Despite the retreat, oil posted multiweek gains, with Brent up for a fourth straight week and US crude a fifth week in a row. Both benchmarks rose about 2 per cent this week.

Global oversupply in oil had knocked crude prices down from mid-2014 highs above $100 a barrel to 12-year lows earlier this year, bringing Brent to around $27 and US crude to about $26. Over the past two months, prices rallied to reach above $40 after OPEC floated the idea of a production freeze at January’s highs. The combination of declining oil output, smaller crude stockpile builds and surging gasoline consumption in the US also helped the recovery. – (Reuters)