Oil prices dipped on Monday as a rebound in production from Libya's largest oil field prompted selling, and investors worried about higher output from Opec and the United States. Output at Libya's Sharara field was returning to normal after a brief disruption by armed protesters, the National Oil Corporation (NOC) said.
Global benchmark Brent crude futures ended the session down 5 cents, or 0.10 percent, at $52.37 a barrel at 2:05 pm EDT (1805 GMT) after trading as low as $51.37 a barrel US crude futures settled 19 cents, or 0.4 percent lower at $49.39 per barrel, after seeing a low of $48.54 a barrel. Oil fell as much as 2 percent during the session, but traders said they thought some buying kicked in at the lows due to algorithmic trading. Both contracts stood below levels hit last week, which marked their highest since late May.
Doubts have emerged about the effectiveness of output cuts by the Organization of the Petroleum Exporting Countries and other big producers including Russia. Opec output hit a 2017 high in July and its exports hit a record. Oil prices have been pressured as "producers meeting in Abu Dhabi have been slow to assure the market that compliance with this year's production cuts will be improved," Tim Evans, Citi Futures' energy futures specialist, said in a note, adding that "adherence to the limits has actually been quite strong by historical standards."
"The recent increase in Opec production has mostly been a function of recovering volumes from Libya and Nigeria." Officials from a joint Opec and non-Opec technical committee are meeting in Abu Dhabi on Monday and Tuesday to discuss ways to boost compliance with the deal to cut 1.8 million barrels per day in production. Oil output in the United States remained high even though Baker Hughes data on Friday showed a cut of one drilling rig in the week to August 4.
US weekly oil production hit 9.43 million bpd in the week to July 28, the highest since August 2015 and up 12 percent from its most recent low in June last year. Morgan Stanley said in a note on Monday it expects to see US oil production growing by 900,000 bpd in the fourth quarter versus a year earlier, up from a previous forecast of 860,000 bpd. Some analysts expected Opec could talk up prices.
"Saudi Arabia will restate that they will export only 6.6 million bpd (six-year low) in August and inventories will continue to draw down," SEB Markets chief commodities analyst Bjarne Schieldrop said. On the global demand side, Goldman Sachs said data available so far for June points to continued strong growth. "We believe that the biggest driver for this robust demand is strong economic growth in recent months," Goldman said in a note.
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