Oil prices dropped on Monday, nearing their lowest level this year, in line with another decline across global stock markets, which came under pressure from concern about a US government shutdown and a worsening world economy.
Oil stagged a recovery early Monday as prices surged 1.1 per cent to $54.42 and then dropped in the late session.
The oil market showed signs of edging up on Monday as Opec hinted that it might extend or even deepen its pledged output curbs. Monday's slight surge is the first signal that oil prices had started reacting to Opec and allies' decision to cut oil production by 1.2 million barrels per day from January.
Also, remarks by the UAE Minister of Energy and Industry Suhail bin Mohammed Faraj Faris Al Mazrouei on Sunday that "should that fail to balance the market, Opec and its allies will hold an extraordinary meeting" seemed to spur the pick-up even as the price drop had caused US shale oil producers to curtail drilling plans for the next year.
However, concern about the outlook for demand tempered gains, analysts said. Even with the signs of slowing US supply, global production remains in excess of demand, they said.
Brent crude futures rose in early trade before easing to $53.24 by 1450GMT, having fallen from a session high of $54.66, while US crude futures lost 90 cents to trade at $44.69.
The trade dispute between the US and China and the prospect of a rapid rise in US interest rates have brought global stocks down from this year's record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.
Al Mazrouei said in Kuwait a joint Opec and non-Opec monitoring committee would meet in Baku in late February or early March.
At a press briefing in Kuwait, ministers from Iraq and Algeria also took turns repeating the message that Opec will deliver its cuts.
"Indeed we view that the battle for market share between Opec+ and shale will continue for the foreseeable future as current spot prices will only incentivise shale growth - faster learning rates, productivity gains, lower tax rates, project redesign, as well as access to low cost of funding which continues to drive engineering cost deflation - leading to market share gains that will likely be difficult to reverse," said Ehsan Khoman, head of Mena Research and Strategy at Japanese bank MUFG.
"Oil ministers are already taking to the airwaves with a 'price stability at all cost' mantra," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda.
"The recent weakness in the physical Brent structure can be attributed to a broader easing of purchases by Asian refiners at this point, with lower end-Q1 intake weighing on spot assessments, and we can expect this pressure to carry through over the coming weeks," consultancy JBC Energy said in a report.
Kim Kwang-rae, a commodity analyst at Samsung Futures, said: "In the short term, it doesn't seem oil prices would drop further because WTI has broken the $50 resistance level and US President Trump would not want to see WTI falling further to support US shale industry."
The boom in shale output has made the US the world's largest oil producer, overtaking Saudi Arabia and Russia.
Global equity markets have plunged amid concerns of slowing trade flows, especially with the trade war between the US and China, the world's two biggest economies.
Equity markets in Asia were moderately higher on Monday, though trading was limited because of the Christmas holiday on December 25.
While the US is pumping at record levels and inventories are also high, Trump's trade war with China and the Federal Reserve's rate-hike policy are raising concerns over the health of the global economy. Prices have collapsed 40 per cent from a four-year high in October.
By Issac John
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