Oil futures rebounded off a three-week low on Monday, but some analysts doubted prices would move far above $50 a barrel near-term as growing U.S. production keeps future gains capped.
Brent crude, the global oil benchmark, rose 1% to $52.50 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 1% at $50.14 a barrel.
Crude came under fresh pressure last week as data showed U.S. production growing and gasoline stocks increasing. According to Baker Hughes, the U.S. oil rig count increased by another 5 to 688 last week, indicating further production increases are to come. Crude oil closed the week having lost more than 6% of its value.
"All the signs in the US still point to oil production being expanded there," said Commerzbank in a note, adding that drilling activity has risen almost continuously for the past 11 months.
Amid rising U.S. oil production, investors are now wondering whether current production cuts by the Organization of the Petroleum Exporting Countries and Russia will ultimately be enough to sufficiently cut into global supplies.
"In the second half of the year we will see strong production growth from the U.S., making the job of OPEC more difficult," said Giovanni Staunovo, analyst at UBS.
Mr. Staunovo said that when OPEC meets in May they will have to assess whether their cuts have reduced global stocks while also considering what impact reverting to higher output could have on oil prices.
"Last year's decision was also related to the weaker OPEC members wanting
higher revenues and therefore I think it will be an extension, based on the fact that it generates higher revenues," he said.
Oil prices jumped around 20% last year after OPEC and other major producers agreed to cut output by around 1.8 million barrels a day for the first six months of 2017.
To date, the cartel has reached a tentative agreement to keep those cuts up till beyond June, but there is no consensus for how long.
"What worries the market is what if production cut doesn't work. What else can OPEC do?" said Gao Jian, an analyst at SCI International.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.7% to $1.66 a gallon. ICE gasoil changed hands at $474.25 a metric ton, up $6.75 from the previous settlement.
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(END) Dow Jones Newswires
April 24, 2017 06:14 ET (10:14 GMT)