By Amanda Cooper
LONDON: Oil prices slid for a second day on Monday, under pressure from signs that some of the nimbler US producers increased drilling last week and from uncertainty surrounding a meeting of the world's major exporters next month to discuss freezing output.
U.S. energy firms last week added one oil rig after 12 weeks of cuts, according to data from industry firm Baker Hughes. Oil rigs have fallen by two-thirds over the past year to their lowest since 2009, and this surprise addition suggested the drop-off in crude drilling may be stabilising after the oil price's 50-percent rally since February.
Oil hit a 2016 high above $40 a barrel last week, encouraged by optimism that OPEC and its major non-OPEC counterparts could strike a deal next month to leave supply unchanged at January's levels. That could help mitigate one of the largest global build-ups of unwanted crude in modern times.
Brent crude futures were down 41 cents at $40.79 a barrel by 0921 GMT, having hit a 2016 high of $42.54 last week, while U.S. futures fell 68 cents to $38.76.
The Federal Reserve's more cautious note last week on the outlook for U.S. interest rates sapped the dollar of some strength. That theoretically encourages demand for dollar-priced assets such as commodities, as these become less costly for overseas investors.
"A cynic might say that OPEC have seen that mere talk of a freeze and a meeting is worth several dollars a barrel, so best stretch the whole process out before the damp squib is revealed," PVM Oil Associates' David Hufton said.
"A March 20 meeting in Moscow has changed into an April 17 meeting in Doha, which is only six weeks ahead of the next full OPEC meeting on June 2. Dollar strength that might reverse and a production freeze that might turn out to be an empty vessel are not the strongest foundations on which to be long oil at $40 a barrel," he added.
Brent futures are still set for their largest one-month gain since April last year, up by more than 13 percent so far in March, after having fallen in all but six out of the last 18 months.
Investors are becoming more friendly towards oil after an almost unbroken rout in the last year and a half. Data on Friday showed money managers raised bullish bets on U.S. crude to a
five-month high.
"The rebound in crude oil prices in the last month appears to have stabilised the number of rigs at work in the U.S. shale sector," ANZ said in a note to clients.
Reuters
