Investing.com - Oil prices kicked the week off with steep declines on Monday, adding to overnight losses as indications of increased drilling activity in U.S. offset signs OPEC members are adhering to planned output cuts.
Crude oil for February delivery on the New York Mercantile Exchange slumped $1.41, or around 2.6%, to $52.56 a barrel by 10:30AM ET (15:30GMT), after inching up 23 cents, or about 0.4%, on Friday.
Elsewhere, Brent oil for March delivery on the ICE Futures Exchange in London slid $1.52, or 2.7%, to $55.57 a barrel. London-traded Brent prices added 21 cents, or 0.4%, in the prior session.
According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. last week increased by 4 to 529, the tenth straight weekly rise and a level not seen in more than a year.
Some analysts have warned that the recent rally in prices could be self-defeating, as it encourages U.S. shale producers to drill more, adding to concerns over a global supply glut.
Meanwhile, traders continued to monitor developments surrounding the landmark deal reached by the Organization of the Petroleum Exporting Countries and several non-OPEC oil producers to reduce their output this year.
Oil tallied a weekly gain last week amid signals that major oil producers, such as Saudi Arabia and Kuwait, are sticking to their pledge to cut back output.
January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day.
The deal, if carried out as planned, should reduce global supply by about 2%.
However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.
There are also some worries in the market about production increases in Libya and Nigeria, which are both allowed to ramp up production as part of the OPEC deal.
Elsewhere on Nymex, gasoline futures for February declined 4.1 cents, or 2.5% to $1.585 a gallon, while February heating oil dropped 4.1 cents, or 2.4%, to $1.660 a gallon.
Natural gas futures for February delivery sank 15.9 cents, or 4.8%, to $3.127 per million British thermal units.
Prices of the heating fuel lost 43.9 cents, or 11.8%, last week, as forecasts of mild January weather replaced predictions of severe cold.
In the week ahead, market participants will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer.
Traders will also continue to pay close attention to comments from global oil producers for further evidence that they are complying with their agreement to reduce output this year.