Crude futures eased in Asia Monday dragged by concerns whether ongoing production cuts by producers in the Middle East and Russia was enough to offset the increasing U.S. oil being pumped into the still oversupplied market.
Trading is expected to be muted across the board as several markets in Asia and Europe are closed today for a public holiday.
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On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $49.23 a barrel at 0202 GMT, down $0.10 in the Globex electronic session. July Brent crude on London's ICE Futures exchange fell $0.12 to $51.93 a barrel.
Oil prices rose over the weekend after traders closed out on a recent raft of bearish bets. However, outlook is still downbeat as U.S. shale producers continue to crank up their output. Latest data from industry group Baker Hughes showed rigs drilling for oil in the U.S. rose again by nine last week. At 697, the volume is double from the low it fell to less than a year ago.
Analysts say the market is caught between the rising U.S. production and the diminishing output from the Organization of the Petroleum Exporting Countries and other heavyweights like Russia. The OPEC-led effort to tighten the oil market has slowed down the growth of global inventories but is still nowhere near the five-year averages, a level that OPEC is striving for.
OPEC Secretary-General Mohammed Barkindo suggested the supply cuts have had some success, with U.S. inventories falling for the past three weeks, while global inventories increased less than normal during the first quarter, said ANZ Research.
The general market expectation is for the consortium to further curtail their production after June, but several questions still loom, such as the length of the extension, quotas for the individual producers, and the sustainability of the compliance level.
The group will announce the details on May 25.
"If an extended production agreement is reached...then the market would remain supported in the second half of the year," said Stuart Ive, a client manager at the New Zealand-based OM Financial.
Even though there have been some discouraging comments from some OPEC members, such as Iran who said it has the ability to produce more, analysts say the country is already near its maximum capacity of 4 million barrels a day. Iran is exempt from the production cut deal.
Brewing geopolitical tensions between North Korea and the U.S. is also being closely watched by oil investors. During an interview over the weekend, President Donald Trump left open the possibility of military action against North Korea if the regime conducts another missile test.
Nymex reformulated gasoline blendstock for June--the benchmark gasoline contract was near flat at $1.5451 a gallon, while June diesel gained 0.2% at $1.5083. ICE gasoil for May changed hands at $453.75 a metric ton, down $0.25 from Friday's settlement.
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(END) Dow Jones Newswires
April 30, 2017 23:28 ET (03:28 GMT)