US crude settles at $48.84, down 1% on rising output and signs of weak demand

Key Points
  • Brent crude edged below $52 a barrel as rising oil output and drilling in the U.S. countered OPEC-led production cuts.
  • U.S. drillers added nine oil rigs in the week to April 28, bringing the count to the most since April 2015.
Photographer | Collection | Getty Images

Oil slipped more than 1 percent on Monday, as rising crude output with Libya hitting its highest production since 2014 and increased U.S. drilling countered OPEC-led production cuts aimed at clearing a supply glut.

Signs of slower-than-expected growth in manufacturing in China and a weaker figure for U.S. manufacturing sentiment also weighed on expectations for oil demand and the market.

U.S. crude for June ended Monday's trading down 49 cents, or 1 percent, at $48.84 a barrel. Global benchmark Brent crude for July was down 51 cents, or 1 percent, at $51.54 a barrel by 2:35 p.m. ET (1835 GMT).

"The market continues to hunt for a bottom," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.

U.S. crude has lost nearly 9 percent since April 11, weighed down by the market's impatience with the slow pace of inventory drawdown around the world even after major oil producers agreed late last year to cut production by 1.8 million barrels per day for the first half of 2017.

Energy: Bull vs. bear

The Organization of the Petroleum Exporting Countries and participating non-OPEC countries meet on May 25 to discuss whether to extend that reduction. Given that inventories remain high and prices are half their mid-2014 level, OPEC members including top exporter Saudi Arabia support prolonging the curbs.

OPEC and participating non-OPEC countries meet on May 25 to discuss whether to extend the reduction.

Libya's National Oil Company said production has risen above 760,000 bpd, highest since December 2014, with plans to keep boosting production. That OPEC member had been excluded from production cut estimates because armed conflict had sapped overall production.

Despite OPEC's efforts, the oil glut has been slow to shift.

"With four months of the cutting in effect we haven't seen a sizable reduction in global oil fuel inventories," Tradition's McGillian said. "It's not sizable enough to see some proof, and the market is having trouble holding most of its gains since 2016."

Iran's oil minister said on Saturday that OPEC and non-OPEC producers had given positive signals for an extension of output cuts, which Tehran would back.

Rise in rig count has caused OPEC soul searching: Pro

U.S. drillers added nine oil rigs in the week to April 28, bringing Baker Hughes' count to the most since April 2015, the energy services company said on Friday. Crude output in the United States has hit its highest since August 2015, government data shows.

"The U.S. rig count indicates that there is plenty more to come," analysts at JBC Energy said in a report, referring to the outlook for U.S. production.

U.S. gasoline futures were down about 1.4 percent, continuing a streak of weakness amid tepid fuel demand that has led the energy complex lower in recent weeks.

On Monday, President Donald Trump said he was open to raising the U.S. excise tax on gasoline to help fund infrastructure spending, a core part of his economic plans.

Prices also came under pressure after an official survey showed on Sunday that growth in Chinese manufacturing slowed faster than expected in April, potentially weighing on the outlook for oil demand.

"The moderation in the China PMI (purchasing managers' index) could see commodity prices come under some modest pressure," ANZ bank said in a note.

— CNBC's Tom DiChristopher contributed to this report.