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Oil prices fall on latest rise in US drilling

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Oil prices fell early on Monday, pulled down by a rising rig count in the United States, record Opec-output, and slowing global economic growth which could erode fuel demand.

[SINGAPORE] Oil prices fell early on Monday, pulled down by a rising rig count in the United States, record Opec-output, and slowing global economic growth which could erode fuel demand.

US West Texas Intermediate (WTI) crude oil futures were trading at US$50.03 per barrel at 0030, down 32 US cents from their last settlement.

Traders said that WTI was pulled down by another rise in US oil drilling activity.

A closely watched report on Friday by oil services provider Baker Hughes showed US drillers added four rigs in the week to Oct 14. It was the 16th week in a row that oil drillers had gone without making cuts, indicating more production to come.

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International benchmark Brent crude oil futures were also down, shedding 20 US cents from their last settlement to US$51.75 per barrel.

Traders said Brent was being weighed by fresh production records from the Organization of the Petroleum Exporting Countries (Opec), which pumped out a record 33.6 million barrels of crude oil per day in September.

"Record supply from Opec year-to-date, weaker global GDP estimates, and still elevated inventories cause us to lower and flatten our oil price outlook," Bernstein Energy said in a note to clients on Monday.

"We reduce our Brent forecast to US$60 per barrel in 2017 (US$70 per barrel before) and US$70 per barrel in 2018 (US$80 per barrel before)," it added.

Despite Monday's falls, analysts said that traders were cautious about driving the market much further down, largely because of a plan by Opec to cut output in an initiative to rein in a global production overhang, which currently sees around half a million barrels of crude pumped every day in excess of demand.

Opec is scheduled to meet on Nov 30 to discuss a production cut. The producer cartel hopes non-Opec members, particularly Russia, will join a potential cut.

"With (non-Opec member) Russia expressing an interest to join the agreement, investors are reluctant to get too bearish," ANZ bank said on Monday.

REUTERS

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