Oil prices slipped on Monday despite news that OPEC was supportive of extending a six-month deal to cut output as investors continue to grapple with worries about growing U.S. oil output and high inventories.
Benchmark Brent crude futures briefly surged into positive territory, but edged back down again, after sources within the group said the Organization of the Petroleum Exporting Countries was considering extending production cuts into the second half of 2017.
The brief surge repeats a pattern that has emerged in the last 10 days after a market rout that saw big speculators exit bullish positions on persistently high inventory figures. Crude has made a few attempts to rebound after a 10 percent decline a week-and-a-half ago, but the surges have generally been brief.
Analysts say speculative investors are likely to keep reducing bullish positions, thanks to optimism amongst U.S. producers boosting drilling activity, which in part will offset OPEC attempts at reducing supply.
“I think oil is reacting still to the steady rise in the U.S. rig count and the realization that momentum is building to the downside from the repositioning of speculative interests in the market,” said John Kilduff, partner at Again Capital in New York.
Last week speculators cut more than 150,000 contracts betting on firmer U.S. and Brent oil prices, a record high.
Latest U.S. drilling data supported estimates for higher production, with 14 oil rigs added in the week to March 17 to 631, the most since September 2015, energy services company Baker Hughes Inc said on Friday.
Brent was at $51.67 a barrel, down 9 cents, at 11:53 a.m. EDT (1653 GMT). U.S. West Texas Intermediate (WTI) crude futures rebounded from losses, but were down 43 cents to $48.35 a barrel.
Growing U.S. production is playing into concerns about the effectiveness of the deal between members of OPEC and other producers.
An upgrade in non-OPEC supply prospects also led analysts at J.P. Morgan to cut their 2017 and 2018 price forecasts to $55.75 and $55.50 for Brent and to $53.75 and $53.50 for WTI, respectively.