Oil prices dropped on Monday, August 21, as a rally at the end of last week prompted investors to close positions at a higher price, against a backdrop of signs the global market is starting to rebalance.
Benchmark Brent crude futures LCOc1 were down 29 cents at $52.43 a barrel at 0856 GMT, after surging more than 3 percent in the previous session.
U.S. West Texas Intermediate crude futures CLc1 traded at $48.39 a barrel, down 12 cents. The contract had also risen 3 percent in the previous session.
“We are currently seeing some profit-taking after Friday’s strong rally ahead of this week’s inventory data,” said Hans van Cleef, senior energy economist at ABN Amro.
“Fresh uncertainty about inventories and OPEC compliance (with agreed production cuts) could be enough reason to sell some of the long positions.”
U.S. hedge funds and money managers have already started lowering their bets on rising prices.
Commodity Futures Trading Commission data showed on Friday that investors had cut bullish bets on U.S. crude for a second straight week.
The world remains awash with oil despite a deal struck by some of the world’s biggest producers to rein in output. Rising U.S. production has been a major factor keeping supply and demand from balancing.
However, there are indicators that U.S. output may soon slow, as energy firms cut rigs drilling for new oil for a second week in three, energy services firm Baker Hughes reported on Friday. Drillers slashed five rigs in the week to Aug. 18, decreasing the count to 763. RIG-OL-USA-BHI
“The rig count suffered its biggest fall since January, adding to signs that the market is tightening,” ANZ bank said.
Also, U.S. commercial crude inventories have fallen almost 13 percent from their March peaks, to 466.5 million barrels.
Analysts said falling crude inventories, despite rising output, indicated the market was tightening.
Elsewhere, a shutdown of Libya’s Sharara oilfield due to a pipeline blockage provided some upside.
Libya’s National Oil Corp declared force majeure on loadings of Sharara crude from the Zawiya oil terminal on Sunday.
