By Henning Gloystein
SINGAPORE (Reuters) – Oil prices fell in early trading on Monday as the chances of Middle East producers agreeing to curb overproduction appeared to fade, while U.S. output remains stubbornly high.
Front month U.S. West Texas Intermediate (WTI) crude futures (CLc1) were trading at $ 36.25 per barrel at 0143 GMT, down 1.5 percent or 54 cents from their last settlement.
International Brent futures (LCOc1) were down 1 percent or 40 cents at $ 38.27 a barrel.
The falls extended a 4 percent tumble on Friday when Saudi Arabia said it would only participate in a global freeze of its output if its rival Iran also took part, something Tehran has so far dismissed.
Adding to concerns of a global glut which has pulled down prices by as much as 70 percent since 2014, U.S. production has remained high despite steep cuts in drilling for new reserves as well as a jump in bankruptcies.
“In the U.S., rigs targeting oil production declined by 10 to stand at 362 active rigs (last week),” ANZ bank said.
Yet despite the ongoing decline in the rig count, U.S. production remains high, at over 9 million barrels per day, as bankruptcies are so far having little effect on overall output while operators keep their oil wells gushing in a struggle to service debt and stay alive.
Reflecting a spreading belief that crude prices might not recover by much any time soon, hedge funds have cut their net long postitions which would benefit from further price rises in WTI futures for the first time in six weeks.
Despite a pick-up in recent economic data, analysts also poored cold water on recent hopes that Asia’s economic prospects were improving, which could support oil demand and prices.
“Some data has started to perk up, notably China’s manufacturing PMIs for March. Across Asia, exports, production and even consumer spending should also show a bit more swing in the coming months,” said HSBC’s Frederic Neumann on Monday.
“Still, fundamentally, have things really improved? No. It’s mostly that a more dovish Fed and a weaker dollar have put a temporary gloss on things. Asia continues to face a structural growth problem – one that will not be cured in the space of a few, short months,” he added.
(Reporting by Henning Gloystein; Editing by Richard Pullin)
