Oil futures were mixed Monday as investors questioned whether last week's rally was an overreaction given ongoing concerns about oversupply.
Brent crude, the global oil benchmark, rose over 7% last week while West Texas Intermediate, the U.S. gauge, gained 6.5%, with both benchmarks pushed higher by data showing the first decline in U.S. oil-drilling activity since January.
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But on Monday some investors said the rally may have gone too far, with an increase in Libyan crude production reminding them of the abundance of oil.
Brent fell 0.1% to $48.71 a barrel on London's ICE Futures exchange in late morning trade in Europe. On the New York Mercantile Exchange, futures were trading down 0.1% at $45.99 a barrel. Both benchmarks had opened higher in Asian trading.
"Some market participants recognized that prices went up too strongly last week," said Carsten Fritsch, an analyst with Commerzbank.
Libyan production topped 1 million barrels a day at the end of June, according to JBC Energy.
That news is also "keeping the market in check," said Ole Hansen, a commodities strategist at Saxo Bank.
Despite last week's bounce, oil futures have fallen about 15% this year.
Growth in U.S. production has been hampering efforts led by the Organization of the Petroleum Exporting Countries to reduce global oil inventories.
Last week's drop in a weekly count of U.S. rigs by Baker Hughes came after a record 23-straight weeks of rises. That helped support the argument that shale producers may have stumbled amid a prolonged patch of low prices.
"The decline signals that U.S. oil supply struggles to remain profitable between $40 and $45 a barrel," said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.
But some analysts say last week's data wasn't necessarily a change in direction, given activity was impacted by bad weather.
"The bulls will hype up the data for sure, but the market fundamental hasn't changed," said Gao Jian, an energy analyst at SCI International. The market "is still very oversupplied."
Traders and investors are also watching the continuing fracas between Qatar and its neighbors. Saudi Arabia and other Gulf Arab states has extended a deadline by 48 hours for Qatar to meet its demands, which include closing down state broadcaster Al Jazeera and curbing ties with Iran. Qatar remains defiant that it isn't aiding Iran-based terrorism movements, as alleged by the bloc.
Even though the quarrel will likely remain on verbal and political levels, an escalation of tensions could yet jeopardize OPEC's agreement to cut supply, said Stuart Ive at OM Financial.
Nymex reformulated gasoline blendstock -- the benchmark gasoline contract -- rose 0.61% to $1.50 a gallon. ICE gasoil changed hands at $441.50 a metric ton, up $5.25 from the previous settlement.
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(END) Dow Jones Newswires
July 03, 2017 07:32 ET (11:32 GMT)