- U.S. drillers cut for first time in 7 weeks -Baker Hughes
- But U.S. output still expected to rise this year
- Traders liquidate long positions
Oil prices fell on Monday on expectations that U.S. output will rise this year, erasing earlier gains buoyed by lower weekly U.S. rig counts and falling U.S. unemployment.
Brent crude futures were at $65.11 per barrel at 0920 GMT, down 38 cents from their previous close.
U.S. West Texas Intermediate (WTI) crude futures fell 27 cents to $61.77 a barrel.
Helping the dip, hedge funds and money managers cut their bullish wagers on U.S. crude oil for the first time in three weeks, data showed on Friday.
The reduction came as gross short positions on the New York Mercantile Exchange climbed to their highest level in nearly a month.
“Rising production and inventory in the United States has been reducing fund sentiment since it peaked at the end of January,” ING said in a note.
Crude prices had risen on Friday and earlier on Monday after the U.S. economy added the biggest number of jobs in more than 1-1/2 years in February.
In oil markets, U.S. energy companies last week cut oil rigs for the first time in almost two months, with drillers cutting back four rigs, to 796, Baker Hughes energy services firm said on Friday.
Despite the lower rig count, which is an early indicator of future output, activity remains much higher than a year ago. Then, 617 rigs were active, and most analysts expect U.S. crude oil production, which has already risen by over a fifth since mid-2016, to 10.37 million barrels per day (bpd), to expand further.
“Permian and Bakken shale basins still saw active oil rigs rising by 2 and 3 last week, respectively, and are likely to keep U.S. oil production on increasing trend,” ING said.
The United States has become the world’s no. 2 crude oil producer, ahead of top exporter Saudi Arabia. Only Russia pumps more, at nearly 11 million bpd.
The Organization of the Petroleum Exporting Countries (OPEC), together with a group of other producers led by Russia, has been withholding production since the start of 2017 to prop up prices.
It is not clear when the deal to withhold output will end, but Iranian oil minister Bijan Zanganeh said OPEC could agree in June to begin easing current oil production curbs in 2019, the Wall Street Journal reported on Sunday.