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Oil prices fell on Monday, pulled down by rising Russian production and US drilling activity creeping to its highest in more than three years.
Analysts expect surging US output to start offsetting efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold production, which have been in place since early 2017 and have pushed up prices significantly in the first half of this year.
Brent crude futures LCOc1, the international benchmark for oil prices, were at $76.21 per barrel at 0504 GMT, down 25 cents, or 0.3 per cent, from their last close.
US West Texas Intermediate (WTI) crude futures CLc1 were down 21 cents, or 0.3 per cent, at $65.52 a barrel.
Prices were weighed down by another rise in the number of rigs drilling for new oil production in the United States. The rig count crept up by one to its highest since March 2015 at 862, according to energy services firm Baker Hughes on Friday.
That implies US crude output, already at a record high of 10.8 million barrels per day (bpd), will rise further.
“Non-OPEC supply is expected to rise sharply in 2019 led by US shale growth, along with Russia, Brazil, Canada and Kazakhstan,” US bank JPMorgan said in its quarterly outlook published on Friday, adding that it was bearish on the oil price outlook going into the second half of the year.
Going into next year, “oil fundamentals are expected to weaken in 2019 on the back of stronger-than-expected non-OPEC supply, but also potential release of barrels from OPEC as the joint accord between OPEC and non-OPEC is unlikely to stay in place,” JPMorgan said.
OPEC, together with some non-OPEC producers including Russia, started withholding output in 2017 to end a global supply overhang and prop up prices.
OPEC and its partners are due to meet on June 22 at the cartel’s headquarters in Vienna, Austria, to discuss policy.
Meanwhile, Russian news agency Interfax reported on Saturday that Russia’s oil production, the world’s biggest, had risen to 11.1 million bpd in early June, up from slightly below 11 million bpd for most of May, and well above its target output of under 11 million bpd as part of the deal.
Beyond changes in the supply-side, strong demand has been supportive of oil prices.
Overseas crude purchases by top importer China remain above 9.0 million bpd, despite a recent drop from records, Reuters reported.
In India, Asia’s No.2 buyer, May fuel demand rose by 3.4 per cent compared with the same month last year, data from the Petroleum Planning and Analysis Cell of the oil ministry showed on Monday.