While most of the attention Monday morning was concentrated on the presidential election results in France, to which the global markets reacted with a rally, the dip in oil prices was mostly unnoticed. Oil prices fell in the beginning of the week, erasing previous gains once again, as concerns over pick up in production in the U.S accelerated. Expectations that output cuts will be extended by the end of 2017 remain low.
The Organization of the Petroleum Exporting Countries (OPEC) together with other major oil producers around the globe, pledged to cut production by about 1.8 million barrels per day (bpd) for six months from Jan. 1 to support the market, which has been suffering from major oversupply.
"It's a still game of very narrow trading ranges between these mixed drivers," said ABN AMRO's senior energy economist Hans van Cleef. "If OPEC doesn't extend those cut agreements, oil prices will fall under much more pressure." CNBC reported.
The renewed concerns of pick-ups in U.S production came after the week of April 21, in which U.S. companies added oil rigs for a 14th week in a row, to 688 rigs total. CNBC reported that this expansion in production is expected to boost U.S. shale production in May by the biggest monthly increase in more than two years. U.S. crude production is currently stands at about 9.25 million bpd, which is an increase of almost 10 percent since summer 2016. This production level is approaching that of OPEC's top exporter - Saudi Arabia.