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Oil falls below $56; Brent posts biggest third-quarter increase since 2004

I think it's going to be a struggle to move above $60 Brent: Oil Analyst

Reuters  |  London 

oil prices
An oil rig drilling a well at sunrise, owned by Parsley Energy Inc. near Midland, Texas (US) | Photo: Reuters

Oil dipped below $56 a barrel on Monday as a rise in U.S. drilling and higher output put the brakes on a rally that saw prices score their biggest third-quarter gain in 13 years.

U.S. energy companies added oil rigs for the first week in seven and announced its exports rose slightly in September when overall boosted output according to a Reuters survey.

Brent crude, the global benchmark, was down 95 cents at $55.84 a barrel at 1052 GMT. It notched up a third-quarter gain of around 20 percent, the biggest third-quarter increase since 2004 and traded as high as $59.49 last week.

"I think it's going to be a struggle to move above $60 Brent," said Olivier Jakob, oil analyst at

U.S. crude was down 88 cents at $50.79. The U.S. benchmark posted its strongest quarterly gain since the second quarter of 2016.

The rally was driven by mounting signs a three-year supply glut is easing, helped by a production cut deal by global producers led by the Organization of the Petroleum Exporting Countries.

"Brent prices have gone from strength to strength as surplus are being depleted," Bank of America Merrill Lynch said in a report. "Importantly, this rally is supported by a tighter physical market, providing a fundamental backbone that was not present before."

But a Reuters survey on Friday found rose last month, gaining mostly because of higher supplies from and also from Libya, an member exempt from cutting output.

The Libyan gain appears short-lived, however. The country's largest oilfield, Sharara, has been closed since Sunday, an engineer at the field and a Libyan oil source said.

Middle Eastern oil producers are concerned the price rise will only stir U.S. shale producers into more drilling and push prices lower again. Key producers consider a price above $60 as encouraging too much shale output.

In February, oil industry sources said would like to see oil around that $60 level.

Technical charts suggest the rally may be running out of steam. Jakob of said Brent's weekly chart had formed a "shooting star," a pattern is seen as indicating a market has reached a top.

First Published: Mon, October 02 2017. 19:37 IST
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