Oil prices struggle to hold last week's gains

Crude oil prices edged lower this morning despite fresh signs that the market is tightening.

Global benchmark Brent crude futures fell 0.36 per cent to $52.53 per barrel, and US benchmark West Texas Intermediate (WTI) prices were flat at the time of writing.

US crude inventories have dropped 13 per cent since March, and on Friday, oil prices jumped three per cent after US energy firms cut the number of rigs drilling for new oil, according to energy services firm Baker Hughes.

Drillers lost five rigs in the week to 18 August, the biggest fall since January, bringing the total count down to 763. This is a sign that the market is finally starting to rebalance.

However, output from the US was still on the rise, having broken through 9.5m barrels per day (bpd), the highest level since July 2015.

"Oil bulls continue to be thwarted by the resilience of global stockpiles despite the output reducing accord by Opec [the Organisation of the Petroleum Exporting Countries]," said Mihir Kapadia, chief executive and founder of Sun Global Investments.

Opec and key non-members have agreed to a deal to cut output by 1.8m bpd until March 2018 to rebalance the market, but rising US production has hampered Opec's progress.

Oil prices were also hit today by profit-taking traders after Friday's rally and ahead of this week's inventory data, according to Hans van Cleef, senior energy economist at ABN Amro.

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