Reacting to the oversupply, traders cut net long positions in oil, the biggest cut on record, according to the US Commodity Futures Trading Commission (CFTC) data compiled by Reuters.
Oil prices rebounded from session lows sustained in early morning trade, after insider sources from within OPEC said Monday, that OPEC oil producers increasingly favour extending its deal to cut oil production beyond June but expressed the need for Russian Federation and other non-members to remain part of the initiative.
US drillers boosted the rig count for a 9 straight week by 14 to 631 last week, data from Baker Hughes showed on Friday.
Based on the latest monthly report by OPEC, Iran has increased crude oil production to 3.814 bpd in February from an average of 3.725 bpd in the fourth quarter of 2016, when the deal was reached.
US West Texas Intermediate (WTI) crude futures slipped 48 US cents, or 0.98%, to US$48.30 a barrel. May Brent crude LCOK7, -0.14% gave up 14 cents, or 0.3%, to $51.62 a barrel on the ICE Futures exchange in London.
REYL Bank expects that crude oil prices could trade between $50 and $60 per barrel in 2017. "But the magnitude of the improvement was really not known", said one Gulf delegate, as quoted by the Financial Times. "The seven major oil and gas basins in the country would have an output of more than almost five million barrels a day collectively", it said. An 8-9% slide in Brent and WTI crude futures since March 6, if sustained or extended, could also threaten discipline within OPEC and its 11 non-OPEC to adhere to their pledged cuts, prompting further sell-off. Oil production in the United States has risen to above 9.1 million barrels of oil per day (bpd), from 8.5 million bpd in June 2016. The KSA had technically only signed off on cutting production to 10.058 million barrels per day.
Saudi Arabia is the only member that reduced output by more than the agreed numbers, according to Opec figures (130,000 barrels a day cut above its agreed production), while Russian Federation is at nearly at a third (118,000 barrels a day compared with the agreed 300,000 barrels a day). OPEC's next meeting is billed to hold on May 25 in Vienna, Austria and analysts are already speculating on the possibility that OPEC will deepen its cuts above 1.2 million barrels or extend the cuts beyond six months.
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