Oil drifts below US$50 as market pessimism over OPEC deal lingers

Futures were little changed in NY following Friday's 1.8% advance. Result? Oil prices plunged on Monday, which means the trading activities will remain subdued at the start of the new week, which marks public holidays in the U.S., Britain, and China.

The Organisation of Petroleum Exporting Countries (OPEC) and non-members, led by Russian Federation, agreed to extend cuts in oil output by nine months to March 2018.

Last week, oil futures settled higher on Friday, rebounding from the prior session's near 5%-drop as traders continued to digest the latest extension of production cuts from OPEC and some non-OPEC members. This puts it in direction competition with top producers Russian Federation and Saudi Arabia.

Data from energy services company Baker Hughes showed on Friday that US drillers last week added rigs for the 19th week in a row, the second-longest such streak on record, implying that further gains in domestic production are ahead.

"What's concerning is what happens after the nine-month agreement because there isn't an exit plan, while USA producers will probably boost output at least until the second half of this year".

"It's huge inventories around the globe that are really keeping a lid on prices, combined with the ability of those agile U.S. producers who scramble back into action should the oil price rise", Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone.

OPEC's Success depends on the U.S. Total volume traded was about 15 percent below the 100-day average. Prices rose 90 cents to close at US$49.80 on Friday.

Brent for July settlement was at $52.05 a barrel on the London-based ICE Futures Europe exchange, down 10 cents.

Likewise, the oil for delivery in current month gained Rs 38 or 1.20 per cent to Rs 3,216 per barrel. The global benchmark crude traded at a premium of US$2.36 to WTI. USA explorers added two rigs, Baker Hughes Inc. said Friday, the smallest increase this year and a sign that a surge in American production may be slowing. Drillers in the D-J/Niobrara Basin in Colorado led the growth last week, adding 4 for a total of 27 oil rigs in the region.

  • Zachary Reyes