Crude oil futures fell further Monday morning in Asia, as bearish sentiment lingered after Saudi Arabia's and Russia's energy ministers said they were prepared to raise oil production.
"Crude futures were diving early Monday in Asia, continuing Friday's trend, after the energy ministers of Russia and Saudi Arabia, meeting in St. Petersburg, said they were prepared to raise OPEC/non-OPEC production by 1 million b/d," Vandana Hari, founder of Vanda Insights, said.
At 10:30 am Singapore time (0230 GMT), July ICE Brent crude futures fell $1.46/b (1.91%) from Friday's settle to $74.98/b, while the July NYMEX light sweet crude contract slid $1.61/b (2.37%) to $66.27/b.
"As Asian markets open this morning, market participants are holding down their positions in reaction to OPEC comments," Benjamin Lu, investment analyst at Philips Futures said.
"Oil prices have been considerably overpriced, sentiment is now shifting," he added.
The OPEC-led coalition moved closer Friday to a decision to start gradually raising oil production as early as the third quarter, after spiraling concerns over a tighter oil market.
Saudi Arabia and Russia plan to conduct consultations with other countries before the final decision is taken at the OPEC/non-OPEC ministerial meeting in late June in Vienna, the energy ministers of Saudi Arabia and Russia said.
"We've always said that we expect release of supply back into the market will be a gradual process. It's likely that will happen in the second half of this year," Saudi Arabia's Khalid al-Falih said during a panel discussion at the St. Petersburg International Economic Forum.
This news on Friday saw crude prices drop more than $2/b , with the ICE July Brent futures contract touching an intraday low of $76.01/b on Friday.
The European benchmark contract fell further during the Asian session on Monday trading, below $75/b. The last time the contract was lower was in early May, from where it had risen to touch $80/b.
"Brewing speculation over potential disagreements in the upcoming OPEC meeting on 22nd June 2018 left oil bulls up and dry into the start of a new week," OCBC commodity economist, Barnabas Gan, said.
OPEC and non-OPEC ministers are scheduled to meet in Vienna June 22-23, where a decision regarding the production cut agreement's validity and capacity would be taken.
Regarding the volume of production rise, the concrete figures are yet to be specified to ensure "the supply is adequate," Falih said.
"Different numbers have been looked at." The coalition will "make sure that consumers' concerns are met," he added, as demand is expected to pick up in the second half of the year.
Analysts also said that adding further pressure to prices was the latest oil rig count data released by Baker Hughes, which showed that US oil rigs rose by a whooping 15 to 859 for the week ended May 25.
"The US oil rig count jumped by 15 in the week to May 25, according to Baker Hughes. That, combined with a continued rally in the US dollar -- which settled at a fresh six-month high Friday -- adds to the increasingly bearish sentiment on crude," Hari said.
The US Dollar Index closed on Friday at 94.21 and as of 0230 GMT Monday is down 0.3% at 93.39.
Some analysts were, however, bullish on the long-term price trend and reiterated that falling inventories and rising demand would keep prices supported. "Historically, prices have declined after the announcement of OPEC production increases, however, when these occurred in a strong demand environment like today, prices were on average 8% higher than pre-announcement two months later, " Goldman Sachs analysts said in a report.
"As a result, even if headlines provide a cap on prices in the short term, we reiterate our $82.5/b Q3 2018 Brent price forecast, " they added. - Platts -