Prices of oil dropped amid news of an increase in US drilling activity, which raised global concerns of the effectiveness of output cut by OPEC and other key producers.

Increase in US drilling activity will negate the measures taken by the world's other oil exporters.

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According to Baker Hughes data, the number of US oil rigs that were active last week were the highest since November 2015.

This data indicates that US drillers are attempting to leverage the increase in prices of oil, which has touched more than $50 a barrel now following a two-year low.

Global benchmark Brent crude oil prices dropped 25 cents to reach $55.26 a barrel, while US crude futures dropped 8 cents to touch at $53.09, reported Reuters.

"The strong rise in US shale oil rigs is a good thing because it will be needed over the next three years as crude production continues to be hurt by the deep CAPEX cuts."

PVM Oil Associates in London analyst Tamas Varga was quoted by the news agency as saying: "Oil prices are down because of the rise in the US rig count."

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According to Varga, Petro-Logistics' report that OPEC members had reduced output by 900,000bpd this month is not encouraging as this only meets 75% of the target cut.

Last year, OEPC and other oil exporters agreed to reduce production by around 1.8 million barrels per day in the first half of 2017 to push up the prices.

SEB Markets in Oslo chief commodities analyst Bjarne Schieldrop was quoted by the news agency as saying: "In our view the strong rise in US shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-US crude production continues to be hurt by the deep CAPEX cuts both past and present in that segment."

Schieldrop estimates the number of active rigs in the US will continue to grow at a rate of seven every week in the first six months of 2017.