Brent crude continues to bleed on Monday after profit taking has accelerated late last week, with the price dropped to three-week lows around $74,50. Oil attracted buyers on a dip and has recovered slightly early Monday but remains in the red as output concerns still linger.
Steep losses in the market were fuelled by Saudi Arabia and Russia. The two top producers are discussing raising oil output by 1 million bpd in the second half of the year to make up for losses in the countries like Iran and Venezuela. Despite the OPEC+ efforts helped to balance the global market, traders concern that increasing supplies may derail the process of further tightening and cease the rally in prices.
Fresh US data added to the bearishness as Baker Hughes data showed the drillers added 15 rigs last week, to 859, the highest level since March 2015. This is a clear sign that US production will continue to rise even further.
Brent will likely remain under pressure as long as the market prices in the potential increase in OPEC production. This week’s fresh US inventory and production data could add to the bearishness, should the numbers continue to increase. In the short-term, prices need to confirm recovery above $75 in order to regain the 20-DMA at $77.