Oil prices stabilise on lower US rig count, but global glut still weighs

Brent was trading up 34 cents at $33.35 a barrel, while WTI traded at $29.90 a barrel

Oil prices partly recovered on Monday following steep losses in the previous session, supported by a fall in the number of US production rigs in use, but analysts said general oversupply was keeping the market weak.

US West Texas Intermediate (WTI) crude futures were trading at $29.90 per barrel at 0213 GMT, up 26 cents from their last settlement. International benchmark Brent was up 34 cents at $33.35 per barrel. Both contracts fell almost 4 percent on Friday.

A falling rig count in the United States which is expected to lead to a decline in 2016 production helped support prices, analysts said.

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"The US oil rig count continued to decline..., with a total of 26 rigs idled," Goldman Sachs said in a note to clients. "The current rig count implies... annual average US production would decrease by 445,000 barrels per day yoy (year-on-year) on average in 2016," it added.

Despite Monday's gains, analysts said that market conditions remained weak due to an ongoing glut.

Record US crude stocks of 504.1 million barrels pulled back gains from last week's relief rally on the announcement of a production freeze by Russia and the Organization of the Petroleum Exporting Countries (OPEC).

"Crude stocks in the US are at record highs and production is also at or near records and remains way above daily demand, so freezing production at current levels won't reduce the glut, but will actually add to it further," one oil trader said.

With production outpacing demand by 1 million to 2 million barrels every day, crude prices have fallen around 70 percent since mid-2014.

Analysts also said that some producers seemed to show little commitment to a deal reached by Russia and OPEC leader Saudi Arabia, and supported by Qatar and Venezuela, to freeze output at January levels.

"The lack of commitment from some OPEC members on a production freeze remains the key headwind short term," ANZ bank said on Monday.

OPEC-member Iran has shown little interest in restraining production as it was only allowed a full return to oil markets in January following years of sanctions.

Reuters market analyst Wang Tao said that US WTI crude prices could fall below $28 per barrel, based on technical chart data.