Oil prices fell on Monday, dragged down as U.S. oil drilling activity rose to its highest level since March 2015, while increasing output in Russia also weighed on the market, Reuters reported.
Analysts expect surging U.S. output to start offsetting efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold production, which has been in place since 2017 and in the first half of this year pushed up prices significantly.
Brent crude futures, the international benchmark for oil prices, were at $76.37 per barrel at 0010 GMT, down 9 cents, or 0.1 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.2 percent, at $65.62 a barrel.
Russian news agency Interfax said on Saturday that Russia’s oil production had risen to 11.1 million bpd in early June, up from slightly below 11 million bpd for most of May, and well above its target output of under 11 million bpd.
But markets are worried by falling supply from Venezuela and the potential of lower exports from Iran.
Venezuelan production is falling due to sanctions, economic crisis, and mismanagement, while Iran faces U.S. sanctions over its nuclear program that are likely to curb exports in the next few months.
“Sentiment is caught in a tug of war between the drop in supply from Iran and Venezuela and the prospect of rising output from OPEC/non-OPEC coupled with rampant U.S. shale production,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates. Going into next year, the bank said: “oil fundamentals are expected to weaken in 2019 on the back of stronger than expected non-OPEC supply but also potential release of barrels from OPEC as the joint accord between OPEC and non-OPEC is unlikely to stay in place”.
OPEC, together with some non-OPEC producers including Russia, started withholding output in 2017 to end a global supply overhang and prop up prices. Members of the organization and its partners are due to meet on June 22 at the cartel’s headquarters in Vienna, Austria to discuss policy.