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Oil prices fall on worries about oversupply
[NEW YORK] Oil prices fell on Monday as worries about global oversupply return to the fore and the US dollar strengthened, making greenback-denominated crude more expensive.
"The oil market remains on the defensive after last week's price drop called attention to current soft fundamentals, including the extent to which increased Opec production may be delaying the anticipated rebalancing of the global supply/demand balance," Tim Evans of Citi Futures said.
US benchmark West Texas Intermediate for delivery in August fell 65 US cents at US$44.76 a barrel on the New York Mercantile Exchange. The WTI future contract shed about seven per cent over the prior week.
In London, Brent North Sea crude for September delivery, the global benchmark, finished at US$46.25 a barrel, a decline of 51 US cents from Friday's settlement.
Traders were still reacting to last week's smaller-than-expected decline in US commercial crude inventories and a rise in the number of active US oil rigs, said Bart Melek, head of commodity strategy at TD Securities.
"They totally ignored the fact that in the US, there was a big decline in production! So we have a situation where there's still some risk-off sentiment" leading the market lower, he said.
The Baker Hughes report Friday on the number of active drilling rigs in the United States, a barometer of future production activity, showed a rise by 10 last week to 351, the fifth gain in six weeks.
"These are minor increases," Mr Melek said.
"When you look at the chart and how much they've fallen, these little increases aren't going to matter very much." Commerzbank analysts also noted the oil market's turn to negative sentiment, pushing prices lower.
"Just a few weeks ago, market participants had still been looking almost exclusively at price-supportive factors - now they appear to have eyes only for bearish factors again. These include the rise in US drilling activity and the stronger US dollar," they said in a client note.