US oil settles down 3 cents, at $56.93 a barrel

An oil pump jack in the oil town of Gonzales, Texas.
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An oil pump jack in the oil town of Gonzales, Texas.

Crude ended little-changed on Thursday after U.S. oil drilling this week increased for the first time after 29 weeks of declines, data showed on Thursday, the strongest sign yet that higher crude prices are coaxing producers back to the well pad.

The number of rigs drilling for oil in U.S. fields rose by 12, bringing the total to 640, oilfield services firm Baker Hughes reported. At this time last year, 1,562 oil rigs were online.

Experts had expected the rig count to bottom out soon and then rise later in the year.

"We believe about 100 rigs could be added to the U.S. rig count between now and year-end," analysts at Evercore ISI, a banking advisory firm, said in a report this week, noting "The bottom is passing and the upturn is arriving."

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Front-month U.S. crude, also known as WTI, closed down 3 cents, at $56.93 a barrel. It tumbled 4 percent in the previous session, the most since early April, after a surprise inventory build last week.

Brent crude futures were flat at $62 per barrel.

Prices earlier rose about 1 percent on Thursday after tame U.S. jobs and economic data signaled the Federal Reserve would be less hasty to raise interest rates while a surge in gasoline futures drove expectations for more crude demand.

But with the Greek debt crisis unresolved and Iran nuclear talks pending, and Friday's U.S. Independence Day holiday making for a longer-than-usual weekend, some caution prevailed, limiting the rally.

The dollar slipped against the euro after U.S. jobs growth slowed in June, tempering expectations for a September rate hike. A softer dollar makes oil, denominated in the greenback, more affordable to users of the euro.

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New orders for U.S. factory goods also fell more than expected in May, negating some optimism in the No.1 economy.

"It's natural for the market to be up given yesterday's thwacking and the weakness in the dollar," said Matt Smith, director of commodities research at Clipperdata, an energy markets database in Houston.

"But we are likely to trade with some nervousness, ahead of the long weekend and while we wait developments on Greece and Iran."

Gasoline futures, also known as RBOB, jumped 1.8 percent. Ultra-low sulfur diesel rose 0.8 percent. "Cracks", or refining margins for such products, also rose, pulling along crude prices on expectations on more crude usage as U.S. summer driving built to a peak.

"RBOB is very strong this morning. Brent and WTI are going for the ride," said Scott Shelton, a commodities specialist in Durham, North Carolina, for broker ICAP.

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Despite losses in June, crude had a sterling second quarter, with Brent up 15 percent and U.S. crude 25 percent higher.

Some analysts expect lower prices in the second half though as U.S. refineries go into autumn maintenance.

"On that basis, we expect to see the crude time-spreads under pressure by the end of the third quarter," Olivier Jakob of Switzerland-based Petromatrix, said, referring to weakness in nearby oil contracts versus farther-dated ones.