Oil prices fell this morning (MON) as a relentless rise in US drilling undermined an OPEC-led push to tighten supply.
Trading activity is expected to be subdued due to public holidays in China, the United States and Britain.
Brent crude futures LCOc1 were trading down six cents, or 0.12 percent, at $52.09 per barrel at 07:25 GMT.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were down nine cents, or 0.18 percent, at $49.71 per barrel.
The Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed last week to extend a pledge to cut production by around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018. But the decision did not go as far as many investors had hoped and led to a heavy sell-off.
An initial agreement, in place since January, would have expired in June this year.
In a note, BMI Research said: “The immediate market reaction to the May 25 OPEC decision is indicative of the weaker-than-expected impact production cuts had on bloated global crude stocks over H1 2017.”
Despite the ongoing cuts, oil prices have not risen much beyond $50 per barrel.
Much of OPEC’s success will depend on output in the United States C-OUT-T-EIA, which is not participating in the cuts and where production has soared 10 percent since mid-2016 to over 9.3 million bpd, close to top producer levels Russia and Saudi Arabia.
US drillers have now added rigs for 19 straight weeks, to 722, the highest amount since April 2015 and the longest run of additions on record, according to energy services firm Baker Hughes Inc (BHI.N).
Almost all of the recent U.S. output increases have been onshore, from so-called shale oil fields.
Analysts say that reducing bloated global fuel inventories will be key to reining in ongoing oversupply.
Greg McKenna, chief market strategist at futures brokerage AxiTrader, said: “It’s going to be all about inventories and whether they fall as much as OPEC thinks.”
While it is hard to come by reliable global oil inventory data, regional stock levels for the United States, Europe and parts of Asia suggest that inventories have dipped in recent weeks, albeit from record levels.
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