Oil prices slide amid relentless increase in United States drilling

Meanwhile, US drillers increased the rig count by eight to 741, the highest level since April 2015, according to Baker Hughes.

Oil rose more than 1 per cent on Monday on signs of inventory declines in the United States and news that Saudi Arabia will limit volumes of crude to some Asian buyers in July and deepen cuts to the United States.

Falih, speaking to reporters in the Kazakh capital of Astana, also said Saudi Arabia planned to grow exports to the United States in the long-term.

Oil rose on Monday to break a three-day losing streak, after futures traders increased their bets on a renewed price upswing even though physical markets remain bloated, especially from a relentless rise in US drilling. That came after data on Wednesday showed that US crude stockpiles unexpectedly climbed for the first time in nine weeks.

Moreover, even though cartel members last month agreed to extend the pact to March next year, the worries is that some OPEC members are getting jittery and possibly cheating.

"We think the market's negative reaction to a one-week counter-seasonal crude inventory build of 3.3 million barrels was excessive, at least relative to its lack of positive reaction to draws amounting to 10.9 million barrels in the previous two weeks of data", Standard Chartered (BSE: 580001.BO - news) analysts said in a note. While Al-Falih says we will start to see inventory tightening accelerate in the coming weeks, he said that if we don't see inventory drop, then an extension of cuts or a larger cut may be implemented and said that nothing, when it comes to getting the oil market in line, will be off the table. WTI-Brent spread was stable on Jun-2017. But they said the move might prove fleeting. "Physical differentials are still under pressure and the time structure is still under pressure in Brent".

Fundamentally, the market is still oversupplied and USA production has been relentless, but short-sellers may feel that there isn't much downside potential at current price levels.

Stephen Brennock, an analyst with London oil broker PVM, said supply-side strains could "begin in earnest" during the next quarter and give support to crude oil prices. Russia also has favorable tax regimes and exchange rates (Russian company expenditures are in Russian Rubles, but oil sales are in U.S. Dollars) that resulted in record levels of Russian petroleum production in the second half of 2016. The IEA's latest forecast has USA crude supply increasing by an average of 790,000 b/d in 2017, up 100,000 b/d from its previous report, while OPEC projects United States crude rising by 600,000 b/d by the end of the year.

  • Zachary Reyes