Oil prices eased on Monday as signs of a strong recovery in U.S. drilling largely overshadowed news that OPEC and non-OPEC producers were on track to meet output reduction goals.
Ministers representing members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers said at a meeting on Sunday that they had taken 1.5 million barrels per day out of the market. The producers have agreed to reduce supplies by almost 1.8 million barrels per day in the first half of this year.
"Despite comments over the weekend at the OPEC compliance meeting that cuts in OPEC/non-OPEC production were ahead of schedule, a sharp rise in U.S. rig counts and talk of large increases in capital spending seem to be souring the bullish mood," said Phil Flynn, analyst at Chicago-based brokerage Price Futures Group.
U.S. drillers added the most rigs in nearly four years last week, data from energy services company Baker Hughes showed on Friday, extending an eight-month drilling recovery.
Global benchmark Brent crude prices were down 24 cents to $55.25 a barrel at 2:33 p.m. ET (1933 GMT).
U.S. West Texas Intermediate (WTI) crude futures settled down 47 cents to $52.75 a barrel on Friday's close.
Prices pared some losses after Iraq's oil minister said it was too early to say whether the deal needed to be extended and that he expected oil prices to rise to $60-$65 per barrel.
From a technical perspective, both contracts remain - for the time being - above their respective key support levels, said Fawad Razaqzada, technical analyst for Forex.com.
The trend therefore remains bullish for oil until the charts say otherwise, he added.
U.S. oil production has risen more than 6 percent since mid-2016, although it remains 7 percent below a historic high in 2015. It is back to levels of late 2014, when strong U.S. crude output contributed to a crash in oil prices.
"There is a widely held view that prices should be higher because that is what Saudi Arabia is strongly pushing for through immediate supply cuts, but there is concern as to the speed and scale of the response of U.S. shale oil supply to higher prices," Standard Chartered said in a note.
"While we have argued that U.S. shale cannot increase fast enough to balance cuts in production elsewhere, we think that market concerns on the potential U.S. response are still providing short-term resistance to prices heading closer to $60."
Yet there was bullish news from Libya, where an electrical fault at the Sarir oil field has resulted in a 60,000 bpd cut in production, the head of the National Oil Corp said in London.
Oil market speculators added to bullish bets last week, however, showing they were more optimistic about higher prices. They raised long positions on Brent crude futures by 13,931 contracts, weekly data provided by Intercontinental Exchange showed on Monday.
However, a record high gross long position among money managers in NYMEX crude oil futures and options leaves the market ripe for a correction, traders said.
Equatorial Guinea, a signatory of the production cut deal, said on Monday it had made an application to join OPEC as its 14th member.