Oil slips as US adds more rigs

US energy companies last week increased the number of rigs looking for new oil for the first time since late December to 862.

Oil fell nearly 2 per cent on Monday after US companies added rigs for the first time this year, a signal that crude output may rise further, but the price is still on course for its strongest January gain for 14 years.

Further weighing on oil markets, the trade dispute between the United States and China looks unlikely to end anytime soon and its impact on the Chinese economy is increasing.

Brent crude oil futures were down $1.05 at $60.59 a barrel by 1300 GMT, while US futures were down $1.02 at $52.67 a barrel.

US crude production, which hit a record 11.9 million barrels per day late last year, has undermined sentiment in the oil market, traders said.

US energy companies last week increased the number of rigs looking for new oil for the first time since late December to 862, energy services firm Baker Hughes said on Friday.

"The increase in drilling activity in the US ... is generating headwind," Commerzbank said.

"Clearly the significantly lower prices in the fourth quarter are prompting shale oil producers to exercise restraint. Because prices have risen considerably since the start of the year and there is a high number of drilled but uncompleted wells, drilling activity is likely to recover soon."

Even with an uncertain outlook for demand and evidence of growing supply, the oil market has benefited this month from another round of production cuts by Opec and its partners, as well as robust trade in physical barrels of crude led by China.

The price has risen by 12 per cent so far in January, the largest increase in percentage terms in the first month of the year since 2005, when it gained 14 per cent.

Investors have added to their bets on a sustained rise in the oil price this month for the first time since September, according to data from the InterContinental Exchange. - Reuters