WTI shrug-off optimistic Saudi comments, turn lower on worries over rising US drilling activity

WTI crude oil ran through fresh offers at higher level and has now reversed weekly bullish gap to mid-$53.00s region.

Currently trading just around $52.50 region, the black gold gained traction at the start of a fresh trading week in wake of comments from Saudi Arabia's energy minister Khalid al-Falih that OPEC cartel was showing “very good” compliance to oil output cut agreement reached in November last year. According to official report, OPEC and 11-non-OPEC producers have already cut oil supply by 1.5 mbpd, representing over 80% of the total collective target to reduce output by almost 1.8 mbpd. 

The initial up-move, however, turned out to be short-lived as investors remain concerned that prospects of rising US production might negate other major producers' efforts to bring back rebalance in the global oil market. The latest Baker Hughes report on US rig-counts, released on Friday, showed the number of working rigs drilling oil in the US climbed by 29 to 551, its highest level in 14-months.

Meanwhile, a mild greenback recovery from lows also weighed on dollar-denominated commodities - like oil, and collaborated to the reversal from highs.

Technical levels to watch

A follow through retracement is likely to get extended towards $52.15-10 support below which the commodity is likely to head towards $51.40 support area, en-route $51.00 round figure mark. On the upside, momentum back above $53.00 handle could get extended towards $53.30-35 resistance above which the commodity seems all set to head towards reclaiming $54.00/barrel mark.