Oil traders were active on Monday despite the Memorial Day holiday and the closure of U.S. stock and bond markets.
U.S. crude oil futures tumbled to the $66 per barrel level in continued reaction to the possibility that Saudi Arabia and Russia will increase their oil output by 1 million barrels a day, as reported by Reuters.
Meanwhile, traders were likely keenly aware of U.S. oil production, which shows no signs of slowing down. Baker Hughes’ weekly rig count, released on Friday, showed U.S. energy companies added 15 new oil rigs to production last week, taking total drilling activity to its highest since March 2015.
U.S. crude output has already surged by more than 27 percent in the past two years, to 10.73 million bpd, ever closer to Russia's 11 million bpd.
The speculation of an output push by U.S. rivals may cool oil’s recent run even further. Brent crude oil broke through $80 this month, while U.S. crude (West Texas Intermediate) climbed above $72 a barrel. The price rally sparked concerns that inflation could percolate and high prices could curb economic growth.
"The pace of the recent rise in oil prices has sparked a debate among investors on whether this poses downside risks to global growth," Chetan Ahya, chief economist at U.S. bank Morgan Stanley, wrote in a weekend note.
Looking back at history, in 2016, an oversupplied market resulted in oil prices falling to their lowest in more than a decade of below $30 a barrel. At that time, the Organization of Petroleum Exporting Countries (OPEC) and other major non-OPEC oil producers formed an agreement to reduce oil output and began by cutting 1.8 million barrels a day. The output cuts helped revive the market at that time.