Crude Oil Prices Fall as Hopes for Production Cuts Fade

LONDON—Crude oil prices fell Monday because of traders and money managers cashing in while the market was still in bull mode and fading hope for any unilateral agreement on production cuts from major producers.

On the ICE Futures exchange, the October contract for global benchmark Brent was down 1.71% at $50.02 a barrel while U.S. counterpart West Texas Intermediate fell 1.67% to $47.71 for September deliveries.

Last week's uptick in prices has been welcomed by all producers, but many market observers believe that Brent's rise to $50 a barrel won't last that long.

The New York-based Morgan Stanley said in a note that the rise has been down to technical rather than fundamental reasons. The bank said short covering, a market term for buying back oil contracts that were previously sold for a higher price, had given the market a tailwind, but this wasn't likely to last through the coming week.

The U.K.'s Barclays agreed, stating that prices will likely experience another short-term dip in the coming weeks. In a note, analysts said there should be a correction that would see the market fall back again. However, despite the bearish forecast for the third quarter, the bank added that prices should sustainably move to the $50 mark by the fourth quarter.

The prospect of the Organization of the Petroleum Exporting Countries agreeing with other major producers to cut or freeze production in September is now starting to fizzle out with most observers now convinced that there is little chance of a consensus being reached. Any tailwind this may have given to prices over the past week won't be there in the coming five days.

"It seems like the producers are just paying lip service," said Vyanne Lai, the energy analyst at the National Australia Bank.

Meanwhile in the U.S., the oil-field services company Baker Hughes announced Friday that the oil rig count rose by 10 to 406 for the week ending August 19 with implied shale rigs rising by 7, primarily in Texas. This means 32 shale rigs have been added in August alone.

The rebound in shale drilling activity has led Bjarne Schieldrop from Sweden's SEB Bank to forecast that the 32 rigs will add 200,000 barrels a day of supply if they are brought onstream immediately.

Nymex reformulated gasoline blendstock for September—the benchmark gasoline contract—fell 153 points to $1.4976 a gallon, while September diesel traded at $1.5038, 158 points lower.

ICE gas oil for September changed hands at $440.75 a metric ton, down $0.75 from Friday's settlement.

Jenny W. Hsu contributed to this article.

Write to Kevin Baxter at [e-mail]

(END) Dow Jones Newswires

August 22, 2016 05:55 ET (09:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.