Oil inches up in quiet holiday trade, focus on crude glut

Amrita Sen, co-founder and chief oil analyst at Energy Aspects, told Reuters that "OPEC oversold the meeting to the market way too early" - referring to hints prior to OPEC's May 25 meeting that the cartel might also deepen supply cuts, extend them by as long as 12 months, curtail exports, and tell the market how exactly it would terminate supply curbs in 2018 - all of which raised market expectation much higher.

Meanwhile, West Texas Intermediate down 13 cents at United States dollars 49.67, while global benchmark Brent shed 11 cents to USD 52.04 a barrel.

The U.S. oil producers have added rigs in their operations for a 19th consecutive week, raising concerns that U.S. shale oil producers which were able to cut their production cost dramatically over the past years are now a low-priced global competitor and would continue to undermine the OPEC agreement to cut supplies.

Brent for July settlement was at $52.05 a barrel on the London-based ICE Futures Europe exchange, down 10 cents.

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Trading was subdued due to public holidays in China, the United States and Britain.

Futures rose for a second session in NY after an OPEC-led deal to extend output limits through March was initially met with a selloff last week as deeper cuts or a plan for the rest of 2018 weren't proposed. The contract ended the previous week down almost 3 percent.

An initial agreement, in place since January, would have expired in June.

Nine months of current production levels is not going to be enough to meet OPEC's goal of balancing supply, which is limiting price gains, he added.

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Commerzbank analyst Carsten Fritsch called Monday's price moves little more than "intraday noise" but said hints of deeper cuts or a longer extension from Opec left the market deflated after the final decision. Saudi Arabia's Energy Minister Khalid Al-Falih said the oil-cuts strategy is working and that global stockpiles will drop faster in the third quarter.

Moreover, the Financial Post notes that the changing demand landscape threatens the cartel's traditional dominance in market share: "Demand in Western countries is flat, driven by energy-efficiency and slow-growing economies, and the USA may become a net energy exporter over the next decade; China, the largest net importer of crude and one of the world's fastest-growing markets, has begun buying more from non-OPEC countries".

"It's huge inventories around the globe that are really keeping a lid on prices, combined with the ability of those agile U.S. producers who scramble back into action should the oil price rise", Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone.

Even if the rig count did not rise further, Goldman Sachs estimated USA output would increase by 785,000 bpd between the fourth quarter of 2016 and the fourth quarter of 2017 across the Permian, Eagle Ford, Bakken and Niobrara shale plays.

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