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 After an initial rise along with global markets on optimism that
another euro zone crisis over Greek debt had been averted for now,
prices began dipping as analysts said crude markets remained
oversupplied, especially in the United States.
"The term structure of oil continues to weaken and inventories keep
piling up," Bank of America Merrill Lynch said in a note.
Brent crude was trading $1 lower at $59.34 at 6.23 a.m. ET.
Benchmark U.S. WTI crude April futures were trading down 63 cents at
$49.71 a barrel.
WTI's March futures settled at $50.34 a barrel on Friday, expiring
as the front-month contract.
The dollar was up 0.6 percent against a basket of currencies, making
dollar-traded commodities such as oil more expensive for those
holding other currencies.
"The USD index has been trading near 94.85 eyeing the key 95.0
level, adding pressure to the oil market," said Myrto Sokou, senior
research analyst at Sucden Financial, in a note.
Oil prices more than halved between June and January, with Brent
front-month futures reaching a low of $45.19 a barrel on Jan. 13.
Since then, prices have picked up. Brent futures jumped to $63 a
barrel last week as traders closed longstanding short positions in
reaction to a falling U.S. rig count.
Morgan Stanley warned that U.S. crude stocks - currently at record
highs - were set to build through May.
"Despite optimism about the large drop in the U.S. rig count in
recent weeks, the pace of decline has been decelerating," it said.
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"A further slowing would only reinforce concerns that a large
production decline could take longer."
U.S. drilling has slowed this year as producers react to the
collapse in oil prices, but Goldman Sachs also said the pace of the
U.S. rig count decline was now slowing.
U.S. oil production growth is expected to reach 440,000 barrels per
day by the fourth quarter of 2015 compared with a year before, based
on the current rig count, Goldman said in a note.
Analysts said a U.S. cold spell could also prevent crude prices from
rising further.
U.S. East Coast refineries have been hit by cold weather, sending up
heating oil futures on fears of tight supplies.
(Additional reporting by Henning Gloystein in Singapore; Editing by
Dale Hudson)
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