On Monday, oil futures plunged as a higher U.S. rig count showed increasing shale production and fueled worries regarding global oversupply, while a stronger greenback also pressured prices.
International benchmark Brent futures glided 15 cents, or 0.3%, to $53.38 a barrel by 0440 GMT. The March deal closed the prior session down 13 cents at $52.83 a barrel.
U.S. West Texas Intermediate crude futures decline 8 cents, or 0.2%, to $50.52 a barrel after settling 25 cents higher in the prior session.
Both agreements have posted their worst quarterly loss since late 2015 in the March quarter. U.S. futures decline approximately 6% from the prior quarter, while Brent lost 7% as increasing inventory levels outpaced production cuts by OPEC and non-OPEC members.
Crude prices staged a three-day rally the previous week during expectations members of the Organization of the Petroleum Exporting Countries (OPEC) and non-members like Russia would extend output cuts beyond June.
However, prices decline on Friday after energy services firm Baker Hughes said the U.S. rig count surge by 10 to 662 last week, making the 1st quarter the strongest for oil rig additions since mid-2011.
“We could be getting close to the end of the rally. Today’s pause may be significant in terms of market direction – we’ll see what happens in Europe and the U.S. later today,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
“We’ve had a pretty significant rally in the past week, driven by Libya’s production not doing as well due to disruptions, good utilization rates by U.S. refiners and talk of OPEC and non-OPEC members extending production cuts for another six months,” Spooner said.
“Now the market may have priced all those factors in and investors are waiting for additional indicators to give oil prices direction.”
That could come later on Monday when Europe and the U.S. release purchasing managers’ index (PMI) data.
PMI data from China on Saturday indicated the country’s factories expanded for a ninth straight month in March, but at a softer pace as new export orders slowed.
“The China PMI figures were pretty positive – they provide background support for oil prices,” Spooner said.
On Monday, the U.S. dollar index increased against a basket of currencies. A stronger greenback makes greenback-denominated commodities, including oil more expensive for holders of other currencies.
Iraq plans to surge its oil production capacity to 5 million barrels per day before the end of the year,however, Baghdad has assured Organization of the Petroleum Exporting Countries (OPEC) it will fully conform with the pact to reduce oil supply, Oil Minister Jabar al-Luaibi and OPEC Secretary General Mohammed Barkindo stated on Sunday.
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