By Jessica Resnick-Ault
NEW YORK (Reuters) - Oil prices fell on Monday as news of another weekly increase in U.S. drilling activity had oil forecasters concerned that production cuts from other producing nations may not reduce the global supply glut as much as many had hoped.
Global benchmark Brent crude oil prices were down 39 cents at $55.13 a barrel at 11:16 EST (1616 GMT), while U.S. crude futures traded down 53 cents at $52.64. Gasoline futures tumbled 1.6 percent, or 2.42 cents to $1.5029 a gallon.
The number of active U.S. oil rigs rose last week to the highest since November 2015, according to Baker Hughes data, with drillers encouraged by oil prices above $50 a barrel.
The Organization of the Petroleum Exporting Countries and other producers including Russia agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017 to relieve a two-year supply overhang.
First indications of compliance to that deal show members have cut production by 900,000 barrels per day (bpd) in January, according to Petro-Logistics, a company that tracks OPEC supply.
That suggests only 75 percent of the targeted cuts would be met, said Tony Headrick, energy analyst at CHS in Minnesota.
"There's an apprehension about how big that cutback is going to be versus the strength in U.S. crude production," Headrick said. "That gap is a little narrower than folks had anticipated more recently."
Oil prices have remained above $50 a barrel since producers agreed on the deal in December, encouraging drillers in low-cost U.S. shale producing regions to ramp up activity.
"In our view the strong rise in U.S. shale oil rigs is a good thing because it will be needed over the next three years as non-OPEC, non-U.S. crude production continues to be hurt by the deep capex cuts both past and present in that segment," said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.
He estimated the U.S. rig count will continue rising at a rate of seven rigs per week over the first half of the year.
Analysts at J.P. Morgan said they saw a rise in oil prices beyond $60 a barrel in 2018 as unlikely.
"For prices to be supported above $60/bbl in 2018 would likely require continued OPEC output reductions that continue to tighten the market beyond Q3'17 - something that looks unlikely at this juncture," they said in a report to clients.
(Additional reporting by Aaron Sheldrick and Osamu Tsukimori in Tokyo and Karolin Schaps in London; Editing by Mark Potter, Keith Weir and David Gregorio)
Disclaimer: No Business Standard Journalist was involved in creation of this content
