Oil prices declined during the course of the session on Monday due to the rising U.S. drilling activity, following worries over the decision to extend an OPEC-led production cut initially due to end in mid-2017.
Benchmark Brent crude futures lost 37 cents, or 0.73 percent and stood at $50.43 per barrel at the close of trade.
Elsewhere in the United States, West Texas Intermediate (WTI) crude futures dipped 45 cents, or 0.94 percent and end at $47.52 per barrel in late trade.
It seemed that investors believe that the prices were down due to the rising U.S. drilling and production, including worries of whether the Organization of the Petroleum Exporting Countries (OPEC) and other producers would extend output cuts.
"There is currently no shortage of crude oil...the fact that shale oil is going to burgeon is also painfully evident," said Sukrit Vijayakar, director of energy consultancy Trifecta. Vijayakar said there also "seems to be a difficulty in reaching consensus on extending the production cuts".
Traders also said that their supposedly long positions in crude futures were shrinking as the rising U.S. drilling activity and production are constantly contributing.
According to U.S. bank Goldman Sachs, the rig count should remain at current levels and the impact of the recently closed rigs anticipated to resume production was considered.
Hence, it would boost oil production and reach as high as 235,000 barrels per day between the fourth quarter of 2016 and the first six months of 2017.
As the U.S. output continues to rally and worries over OPEC cuts is looming, the discount on U.S. WTI crude prices to international Brent crude grew at $2.90 per barrel, marking its widest close since 2015, in which U.S. oil has become more attractive to Asia and is headed to replace cuts in Middle East production.
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Meanwhile, gold has found support on a weaker dollar and declining bond yields after posting gains of 1.1 percent to end at $1,258 an ounce in late trade since mid-November.
China’s iron ore futures declined sharply as the broader market’s cautious tone added pressure over the rising inventories of the steelmaking ingredient.
The chart below illustrates crude oil price movement amid the rising U.S. drilling and uncertainties over OPEC’s decision on output cuts. Oil is currently trading at $48.25 in a light trading volume of 1778, near support 47.00.
Given the recent fuel supply overhand and rising U.S. drilling output cuts, we can say that the global oil markets were gradually recovering due to a strong demand growth.
However, oil prices could still remain under pressure as demand growth appears only to be in short supply due to the looming US supply.
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