[SINGAPORE] Oil prices dipped on Monday on worries about oversupply in North America, with Brent futures testing support around US$60 a barrel and US contracts hovering around US$50.50.
After an initial rise on Monday along with global markets on optimism that another euro zone crisis over Greek debt had been averted for now, prices began dipping as analysts said crude markets remained oversupplied, especially in the United States, where inventories are at record highs.
Benchmark US WTI crude futures were trading down 14 cents at US$50.67 a barrel by 0630 GMT. International Brent crude was trading virtually flat at US$60.24 a barrel. "US crude stocks are elevated and set to build through May as challenges continue to mount. Similar to last year, growing US and Canadian production combined with refinery maintenance and an only marginal decline in imports is to blame," Morgan Stanley said on Monday.
Oil prices began tumbling in June 2014 as traders reacted to a growing glut, but prices have picked up since mid-January with Brent jumping almost US$20 a barrel to touch US$63 a barrel last week as traders closed long-standing short positions in reaction to a falling US rig count.
US drilling has slowed since the beginning of the year as producers react to the collapse in oil prices, but Goldman Sachs said the pace of the US rig count decline was now slowing.
US oil production growth is expected to reach 440,000 barrels per day by the fourth quarter of 2015 compared with a year before, based on the current rig count, Goldman Sachs said in a note.
Analysts said that a cold spell in the Unites States, which has hit refinery output, could also prevent crude prices from rising further.
Major US East Coast refineries have been hit by cold weather, sending up heating oil futures on fears of tight supplies. "Since the amount of crude oil being refined is less than usual, we would be seeing excess crude oil in the U.S. market ... This causes crude oil to decrease in price while refined products increase in price," Phillip Futures said.