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Oil prices stay weak as US drilling undermines drive to tighten markets

Published 29/05/2017, 12:03 pm
© Reuters.  Oil prices stay weak as US drilling undermines drive to tighten markets
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By Henning Gloystein

SINGAPORE, May 29 (Reuters) - Oil prices remained weak on Monday as a relentless rise in U.S. drilling undermined an OPEC-led push to tighten supply.

Brent crude futures LCOc1 were trading at $52.10 per barrel at 0150 GMT, down 5 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 remained below $50, down 8 cents at $49.72.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed last week to extend a pledge to cut production by around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018. But the decision did not go as far as many investors had hoped.

An initial agreement, which has been in place since January, would have expired in June this year. the ongoing cuts, oil prices have not risen much beyond $50 per barrel.

Much of OPEC's success will depend on output in the United States C-OUT-T-EIA , which is not participating in the cuts and where production has soared 10 percent since mid-2016 to over 9.3 million bpd, close to top producer levels Russia and Saudi Arabia.

U.S. drillers have now added rigs for 19 straight weeks, to 722, the highest amount since April 2015 and the longest run of additions on record, according to energy services firm Baker Hughes Inc BHI.N . say that key to reining in ongoing oversupply will be to reduce bloated global fuel inventories.

"It's going to be all about inventories and whether they fall as much as OPEC thinks," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

While it is hard to come by reliable global oil inventory data, regional stock levels for the United states, Europe and parts of Asia suggest that inventories have dipped in recent weeks, albeit from record levels.

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