"The market continues to flip back and forth on the idea that increased global demand and a production cut is going to support prices. but US production, and North American production levels in general, is going to negate a lot of the impact of that", said Gene McGillian, director of market research at Tradition Energy. Oil prices gave up earlier gains today as rising U.S. output loomed over markets, despite a slowdown in rig drilling activity. While Friday's jump helped push prices higher for the week, futures are still below their peak in January, with the market struggling to recoup losses from last month's broader market slump.
ING's outlook is in contrast to bullish views from Royal Bank of Canada and Goldman Sachs Group Inc.to BMI Research and Societe Generale SA, which see prices supported as strong demand soaks up supply from the U.S. While Patterson does see healthy oil consumption, he said growth may slow and fail to completely absorb gaining American output. "We have monthly reports from the International Energy Agency and OPEC in the coming days to influence prices, but for now, crude is having a downbeat start to the week, unwinding some of Friday's effervescent rally".
West Texas Intermediate, the USA benchmark for the price of oil, was down 0.6 percent to $61.67 per barrel. Total volume traded was about 23 percent below the 100-day average.
According to Baker Hughes energy services firm, U.S. energy companies cut oil rigs for the first time in nearly two months, with drillers cutting back four rigs, to 796. Iran wants OPEC to work to keep oil prices at about $60 a barrel as an increase toward $70 will encourage shale oil output, the country's Oil Minister Bijan Zanganeh said, the Wall Street Journal reported.
While OPEC nations have shown a high level of compliance with their pledged cuts, U.S. shipments eating into the cartel's market share in Asia may prompt some nations to boost supplies, said Warren Patterson, a commodities strategist at ING Groep.
Some of the market's fears were echoed in money managers' short-selling position.