US crude futures strengthened Monday but retreated in post-settlement trade as the market lost confidence OPEC cuts would be sufficient to reduce oversupply given increased US drilling.
US West Texas Intermediate crude rose early in the day and began to pare gains in the late afternoon, settling at US$51.79 a barrel, up 11 cents or 0.21 percent, before retreating to as low as US$51.11 a barrel, Reuters reports.
Brent crude settled at US$54.94 a barrel, up 48 cents — or 0.88 percent — before retreating to US$54.22 a barrel.
Monday’s retreat indicated a potential halt to the rally that drove the market up as much as 19 percent since the Organization Petroleum Exporting Countries’ agreement was struck on Wednesday.
Last week’s 12.2 percent increase was the largest one-week rise since February 2011.
The market fell as investors shifted their focus to rising drilling, said Tariq Zahir, managing member of Tyche Capital Advisors in New York.
“The Brent-WTI spread has blown out, and a lot of that has to do not only with shale but with the idea that there would be more drilling,” he said.
US drilling rigs increased on Friday, boosting sentiment that shale drilling would offset potential cuts from other producers.
After OPEC agreed to curb production by 1.2 million barrels per day (bpd) from January, eyes have now turned to a meeting this weekend between OPEC and non-OPEC producers to expand the deal.
The market remained leery that cuts by non-OPEC members, in tandem with the OPEC cuts, would be sufficient.
Saudi Arabia said it would cut its official selling prices to Asia, indicating that it would continue to strive to maintain market share.
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