Oil prices fell in early Asian trade on Monday, paring gains from the previous session as fears of global recession weighed on the market even as supply remains tight amid lower OPEC output, unrest in Libya and sanctions on Russia.
Brent crude futures slipped 35 cents, or 0.3%, to $111.28 a barrel at 0016 GMT, having jumped 2.4% on Friday.
U.S. West Texas Intermediate (WTI) crude futures similarly dropped 32 cents, or 0.3%, to $108.11 a barrel, after climbing 2.5% on Friday.
While recession fears have weighed on the market over the past two weeks, supply concerns linger, preventing steeper price falls.
“Energy markets remain laden with specific supply risks that makes being short a nervy experience,” Commonwealth Bank commodities analyst Tobin Gorey said.
Output from the 10 members of Organization of the Petroleum Exporting Countries (OPEC) in June fell 100,000 barrels per day (bpd) to 28.52 million bpd- a long way off their pledged increase of about 275,000 bpd, a Reuters survey showed.
Declines in Nigeria and Libya offset increases by Saudi Arabia and other large producers, and Libya faces further supply disruption due to escalating political unrest.
“This makes the likelihood of the group (OPEC) meeting its newly increased production quotas even more unlikely,” ANZ Research analysts said in a note.
Libya’s exports have dropped to between 365,000 bpd and 409,000 bpd, down about 865,000 bpd compared to normal levels, the National Oil Corp said last week.
In a further hit to supply, a planned strike by Norwegian oil and gas workers this week could cut the country’s oil and condensate output by 130,000 bpd.
Traders will be watching out for official prices for August from top oil exporter Saudi Arabia for signs of how tight the market is, with refiners bracing for another sharp increase close to the record level set in May.
Nine refining sources surveyed by Reuters expected Saudi’s flagship Arab Light crude official selling price could rise by about $2.40 a barrel from the previous month.