Oil dips on rising U.S. output, but drilling activity slows

Oil dipped on Monday, weighed down by rising U.S. output although a 13 percent fall in U.S. crude inventories since March indicated a gradually tightening market. 

Brent crude futures, LCOc1 the international benchmark for oil prices, were at $52.64 per barrel at 0639 GMT, down 8 cents, or 0.2 percent, from their last close. 

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $48.47 a barrel, down 4 cents, or 0.1 percent.

Traders said the market was dampened by rising U.S. production, which has broken through 9.5 million barrels per day (bpd), its highest since July 2015. C-OUT-T-EIA

But there are indicators that U.S. output may soon slow, as energy firms cut rigs drilling for new oil for a second week in three, the Baker Hughes energy services firm reported on Friday.

Drillers cut five oil rigs in the week to Aug. 18, bringing the total count down to 763, Baker Hughes said. RIG-OL-USA-BHI

Also, U.S. commercial crude inventories have fallen by almost 13 percent from their March peaks, to 466.5 million barrels. C-STK-T-EIA 

Analysts said that falling crude inventories, despite rising output, indicate the market is already tightening.

Outside the United States, an outage of the Sharara oilfield in Libya might dampen flows in the short-term, traders said. 

Although there was strong support to prevent prices falling, analysts said there was little to drive oil higher.