Oil prices fell on Monday asincreased drilling in the United States pointed to more output,raising concerns about a return of oversupply.
U.S. West Texas Intermediate (WTI) crude futures wereat $62.03 a barrel at 0248 GMT, down 31 cents, or 0.5 percent,from their previous close. Brent crude futures were at $65.88 per barrel, down33 cents, or 0.5 percent. Monday's price falls in part reversed increases last Friday,which came on concerns over tensions in the Middle East. "Despite all the bearish U.S. shale supply headlines, oilprices remain firm as … the odds that the U.S. will pull outof the Iran nuclear agreement continue to run very high," saidStephen Innes, head of trading for Asia-Pacific at futuresbrokerage OANDA. On a simple supply versus demand basis, however, oil marketsare facing the possibility of a renewed glut after being in aslight deficit for much of last year. U.S. drillers added four oil rigs in the week to March 16,bringing the total count to 800, the weekly Baker Hughesdrilling report said on Friday. The U.S. rig count, an early indicator of future output, ismuch higher than a year ago as energy companies have boostedspending. Thanks to the high drilling activity, U.S. crude oilproduction has risen by more than a fifth sincemid-2016, to 10.38 million barrels per day (bpd), pushing itpast top exporter Saudi Arabia. Only Russia produces more, at around 11 million bpd,although U.S. output is expected to overtake Russia's later thisyear as well. Soaring U.S. output, as well as rising output in Canada andBrazil, is undermining efforts by the Middle East dominatedOrganization of the Petroleum Exporting Countries (OPEC) to curbsupplies and bolster prices. Many analysts expect global oil markets to flip from slightundersupply in 2017 and early this year into oversupply later in2018. One risk to supplies, however, is Venezuela. "Concerns that Venezuelan output is on the verge of collapsecontinue to swirl around the market," ANZ bank said. The International Energy Agency said last week thatVenezuela, where an economic crisis has cut oil production by 50percent in two years to below 2 million bpd , was"clearly vulnerable to an accelerated decline", and that such adisruption could tip global markets into deficit despite soaringU.S. output. (Reporting by Henning Gloystein; editing by Richard Pullin andJoseph Radford)