Oil drops on supply glut despite cut in US oil rigs

Markets would likely rebound only if they saw a fall in US crude inventories, said an analyst

Crude oil futures lost ground in early Asian trading on Monday, pressured by a global supply surplus despite a cut in the number of US oil rigs for an eleventh week out of 12.

Benchmark front-month Brent futures for January had fallen 38 cents, or 0.85%, to $44.28 a barrel as of 0133 GMT, after it ending up 48 cents at $44.66 a barrel on Friday.

US crude's West Texas Intermediate (WTI) January contract dropped 54 cents, or 1.29%, to $41.36 a barrel against its previous settlement at $41.90.

"The burden of carrying high US crude oil inventories is large," Kang Yoo-jin, commodities analyst at NH Investment and Securities based in Seoul, said in a note on Monday.

"The markets would likely rebound only if they saw a fall in US crude inventories, while declining US crude output and seasonal demand provide some support to oil at low prices."

Venezuelan oil minister Eulogio del Pino said on Sunday that OPEC cannot allow an oil price war and must take action to stabilise the crude market soon. When asked how low oil prices could go in 2016 if OPEC doesn't change its policy, he said: "Mid-20s."

Algeria's energy earnings are forecast to fall to $26.4 billion next year, while foreign exchange reserves will dip to $121 billion after low oil prices cut into the OPEC nation's economy, Finance Minister Abderrahmane Benkhalfa said on Sunday.

US crude was briefly supported on Friday as US drillers removed 10 oil rigs in the week ended November 20, the biggest weekly decline since late October, bringing the total rig count down to 564, oil services company Baker Hughes Inc said in its closely followed report. 

Markets were keeping an eye on developing geopolitical tensions in the oil-producing Middle East as Jordan's King Abdullah, a US ally, will hold talks in Moscow on Tuesday with Russian President Vladimir Putin on how to tackle "terror groups" led by Islamic State in Syria, an official source said.

Asian shares got off to a slow start Monday as a holiday in Japan sapped liquidity, while the prospect of more policy easing in Europe kept the euro on the defensive to the benefit of the US dollar. 

A top Fed official said on Saturday that there is a "strong case" for raising interest rates when Federal Reserve policymakers meet next month, as long as US economic data does not disappoint.