Oil struggled to post gains Monday as traders digested upbeat signals from OPEC, supply disruptions in Iraq and a drop in U.S. drilling activity.
West Texas Intermediate oil for December delivery CLZ7, +0.23% rose 22 cents, or 0.4%, to $52.06 a barrel, adding to a 0.6% gain for the U.S. benchmark from Friday.
Meanwhile, Brent oil LCOZ7, -0.55% the global benchmark, was up 2 cents at $57.70 a barrel, flipping between small gains and losses.
Traders tracked a range of developments over the weekend. In northern Iraq, continued fighting between government forces and Kurdish separatists exacerbated fears of supply constraints, which have helped pushed oil prices higher in recent weeks.
“An actual supply shortage has emerged and unless the issue is sorted out quickly Iraq (exports from the southern part of the country are reportedly rising to make up for the shortfall), one of the most undisciplined members of the OPEC/non-OPEC supply pact might quickly find its compliance improving significantly,” said Tamas Varga, analyst at PVM Oil Associates, said in a note.
In that vein, the Organization of the Petroleum Exporting Countries said that in September, its members and countries those outside OPEC achieved 120% compliance with the current output agreement.
The oil producer cartel also said Saturday that “all options are left” for rebalancing the market. That comment is seen as reinforcing the view that the output pact will be extended when OPEC meets in November.
A report signaling a slowdown in U.S. drilling was also seen as supporting oil prices. Baker Hughes on Friday said the number of active U.S. oil rigs declined for a third straight week.
“Fundamentals continue to favor the bulls right now, as the relentless rise in U.S. production has finally stalled as OPEC optimism has risen, and demand outlooks have improved,” wrote Tom Essaye, editor of The Sevens Report, on Monday.
Technicals, however, haven’t yet confirmed an upside move, Essaye said, with $54 a barrel remaining stubborn resistance and leaving Nymex crude rangebound, “as it has been all year.”
Rising U.S. oil production has been keeping a lid on oil prices, and analysts at Commerzbank said Monday, “we can expect a considerable increase in drilling activity in the coming months.”
“In this case U.S. oil production, could already reach a record level of over 10 million barrels per day in the first half of 2018. We believe that the prices of both oil types, and especially of Brent, are overheated and expect them to correct in the short term,” the analysts said in a note.
In other energy products on Monday, gasoline for November delivery RBX7, +0.20% was little changed at $1.6785 a gallon, while November heating oil futures HOX7, -0.76% declined 0.4% to $1.7983 a gallon.
November natural gas NGX17, +2.37% rose 2.5% to $2.989 per million British thermal units.