Oil prices decline as tight supply continues

Oil prices fell in early Asian trading on Monday, paring gains from the previous session as fears of a global recession weighed on the market while supply shortages persisted amid lower OPEC production, unrest in Libya and sanctions against Russia.

Brent crude futures fell 35 cents, or 0.3 percent, to $111.28 a barrel at 0016 GMT, after jumping 2.4 percent on Friday.

Likewise, US West Texas Intermediate crude futures fell 32 cents, or 0.3 percent, to $108.11 a barrel, after rising 2.5 percent on Friday.

While fears of a recession have weighed on the market over the past two weeks, supply concerns remain, preventing a sharp decline in prices.

A Reuters survey showed that the production of the ten member states of the Organization of the Petroleum Exporting Countries (OPEC) in June fell 100,000 barrels per day to 28.52 million barrels per day, which is much less than the increase pledged by about 275,000 barrels per day.

Increased production in Saudi Arabia and other major producers offset the decline in production in Nigeria, as well as Libya, which faces further declines in supplies due to escalating political unrest.

The Libyan National Oil Corporation said last week that Libya’s exports fell to between 365,000 barrels per day and 409,000 barrels per day, a decrease of about 865,000 barrels per day compared to normal levels.

In another blow to supplies, a planned strike by Norwegian oil and gas workers this week could cut the country’s oil and condensate production by 130,000 barrels per day.

Traders will watch official August prices from top oil exporter Saudi Arabia for indications of how tight the market is, as refiners prepare for another sharp increase close to the record high set in May.

Nine refining sources polled by Reuters expected that the official selling price of the leading Arab Light crude in Saudi Arabia may rise by about $2.40 a barrel from the previous month.