Oil dives 2%, heads for weekly loss as US rigs rise

Oil prices fell 2 percent on Friday, with losses accelerating after the U.S. oil rig count rose for a fourth week in a row, putting crude on track for a weekly loss and dragging Brent to two-month lows.

Crude futures were already down as investors braced for expected growth in Iraqi crude exports that could add to the global glut. They slid further when energy services firm Baker Hughes reported that U.S. oil drillers added 14 rigs this week, bringing the total oil rig count up to 371.

"The oil complex is already struggling with oversupply issues. More than ample inventories and upcoming refinery turnarounds and maintenance have the bulls on the defensive," said Pete Donovan, broker at Liquidity Energy in New York.

"An increase in rigs is the last thing they need."

Brent was down 90 cents, or 2 percent, at $45.30 a barrel by 1:57 p.m. EDT (1757 GMT). It hit a May 11 low of $45.18 earlier.

U.S. West Texas Intermediate (WTI) crude slid 91 cents, or 2 percent, to $43.84. It fell more than $1 earlier.

Both benchmarks were on track to a weekly loss of about 5 percent.

The dollar`s rally to a more than four-month high also hurt demand for greenback-denominated oil among holders of the euro and other currencies.

Iraq`s oil exports were expected to rise in July, according to loading data and an industry source. If confirmed, it would put OPEC`s No. 2 producer back on track of supply growth after a two-month lag.

"These large and increasing stocks will not only up the likelihood of additional commercial short hedges, but will also encourage the commercials to defer long hedges," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Earlier this week, the U.S. government reported that domestic crude inventories were at 519.5 million barrels last week, historically high for this time of year, even after a ninth straight week of drawdowns.

On Thursday, traders said market intelligence firm Genscape reported a build of 725,176 barrels in the latest week at the Cushing, Oklahoma delivery point for U.S. crude futures.

Falling oil prices have encouraged traders to send U.S. supplies to Europe, counterbalancing 700,000 barrels per day in lost Nigerian supply..

U.S., European and Asian oil product stocks rose 2.35 million barrels last week for a second week of growth.

"The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion," UBS oil analyst Giovanni Staunovo said.