Investing.com - Crude prices were a bit lower to start the week on Monday, slipping from their strongest level in more than two years amid indications that U.S. producers will ramp up output to take advantage of the recent rally.
Oilfield services firm Baker Hughes said Friday that the number of active U.S. rigs drilling for oil rose by nine to 738 last week. It was the biggest jump since June, sparking concern that U.S. shale producers will ramp up output with prices holding near 28-month highs.
The weekly rig count is an important barometer for the drilling industry and serves as a proxy for domestic oil production.
Losses were limited amid optimism that oil producing countries will agree to extend an output cut at their meeting at the end of this month.
Under the original terms of the deal, OPEC and 10 other non-OPEC countries led by Russia agreed to cut production by 1.8 million barrels a day (bpd) for six months. The agreement was extended in May of this year for a period of nine more months until March 2018 in a bid to reduce global oil inventories and support oil prices.
Discussions are continuing in the run-up to the Nov. 30 meeting, which oil ministers from OPEC and the participating non-OPEC countries will attend.
The cartel will release its monthly market report at approximately 6:00AM ET (1100GMT). The data will give traders a better picture of whether a global rebalancing is taking place in the oil market.
Meanwhile, market players kept a watchful eye on developments in the Middle East as well as escalating tensions between Saudi Arabia and Iran.
Saudi Arabia is among the world’s top producers of oil and OPEC’s most influential member.
Brent crude futures, the benchmark for oil prices outside the U.S., dipped 13 cents, or around 0.2%, to trade at $63.39 a barrel by 3:25AM ET (0825GMT). It rallied to $64.65 last Wednesday, a level not seen since June 2015.
The global benchmark ended last week with an increase of approximately 2.4%, the fifth weekly gain in a row.
Meanwhile, U.S. West Texas Intermediate (WTI) crude futures shed 4 cents, or about 0.1%, to $56.69 a barrel. It reached its best level since July 2015 at $57.92 on Wednesday of last week.
WTI prices rose a fifth-straight week last week, gaining around 2%.
Oil's rally, which began in early October, has been largely driven by growing indications that the crude market was finally starting to rebalance. Brent is over 40% above June's 2017 lows, while WTI is one-third higher than its 2017 lows.
In other energy trading Monday, gasoline futures slumped 1.2 cents, or 0.7%, to $1.820 a gallon, while heating oil declined 0.2 cents to $1.933 a gallon.
Natural gas futures lost 4.6 cents, or almost 1.5%, to $3.165 per million British thermal units.