By Henning Gloystein
SINGAPORE (Reuters) - Crude oil prices fell on Monday after U.S. unions called a refinery strike and traders cashed in on strong price gains last week when the market soared on a sharp drop in U.S. drilling.
Yet analysts said that record open interest - the number of outstanding futures contracts - indicated that prices may have bottomed out.
Brent crude oil futures were trading at $51.70 a barrel at 0630 GMT, down $1.29, while U.S. WTI futures were at $47.02, down $1.22 a barrel.
The declines followed a jump back from six-year lows on Friday on the back of a record decline in U.S. oil drilling.
"Oil production in the shale basins will inevitably decrease as weaker, higher-cost producers shutter their operations. This supports our view that oil prices will recover this year and average $60 per barrel for Brent," Nomura said.
Analysts said Monday's declines were a result of profit-taking after last week's gains, as well as rising OPEC-output offsetting lower U.S. drilling.
Asian oil markets also opened to news of a strike at U.S. refineries, potentially denting short-term crude demand.
The United Steelworkers union called strikes at nine U.S. refineries on Sunday.
TECHNICALS
Despite Monday's falls, oil prices have broken out of a range-bound trading pattern within clear trendlines in January.
Along with returned volatility, Brent's open interest rose to a record of 1.7 million, in a signal that traders took on new positions when prices hit lows last month.
With Brent back above $50 per barrel for the first time since early January its price also jumped above its 15 daily moving average value, a key technical indicator, for the first time this year.
Overall, Brent's price curve remains in contango, meaning contracts for prompt delivery are cheaper than those further in the future. March 2015 Brent contracts are around $10 per barrel cheaper than those for delivery in March 2016.
"Curve contango means that oil can be bought at today's spot price, stored in tanks or on anchored vessels and sold forward at higher prices," Timera Energy said on Monday.
"A recent pickup in interest for U.S. storage capacity and the chartering of tankers for floating storage plays illustrates the market reaction to the widening crude curve contango," it added.
(Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin)
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