Oil prices tumbled on Monday, as traders took profits after last week’s surge to an 11-week high and on a report that OPEC continued to boost crude production despite a persistent glut.
Benchmark Brent crude was down $1.05 or, almost 2% at $51.60 after reaching a session high of $53.31. US light crude was down $1.22 or about 2.5% at $48.41. On Friday, WTI settled at an 11-week high, Reuters reported.
“After an 8% rally last week and a move up to the 200 day moving average at $51, crude oil has just gone too far too fast and a pull back today was to be expected,” said Phillip Streible, senior market strategist at Chicago-based RJO Futures.
Last week, the US front-month crude contract breached the 100-day moving average and almost came within a cent of the 200-day moving average on Friday.
Crude prices were pressured on Monday when secondary sources cited in OPEC’s monthly report said the group pumped 31.57 million bpd in September, up 110,000 bpd from August and almost 2 million bpd more than its demand prediction for this year.
OPEC forecast that demand for its oil in 2016 would be much higher than previously thought as its strategy of letting prices fall hits US shale oil supplies. Oil has been on a rollercoaster ride over the last few weeks, recovering from six-year lows in turbulent trade.
North Sea Brent crude dropped to almost $42 a barrel in August, from a peak above $115 in June 2014, but then rallied back to an intraday high of $54.05 on Friday.
Evidence that oil producers are reducing output in response to low prices has helped make sentiment more positive and many traders and analysts now expect prices to be higher next year as global fuel demand recovers. But the upswing appears to have been too fast, analysts say, adding that heavy technical selling had set in.
Data from oil services company Baker Hughes on Friday showed US energy firms cut oil rigs for a sixth week in a row last week in a sign low prices are keeping drillers away from the well pad. Drillers removed nine oil rigs in the week ended October 9, bringing the total rig count down to 605. Since hitting an all-time high of 1,609 a year ago, the number of US rigs operating has fallen by an average of 20 a week.
