US oil prices dipped on Monday, easing from two-year highs on the prospect of increased US output, although global markets were slightly better supported by expectations an OPEC-led supply cut would be extended.

US West Texas Intermediate (WTI) crude futures were at $58.72 a barrel at 0608 GMT, down 23 cents, or 0.4 per cent, from their last settlement. Brent crude futures were at $63.85 a barrel, virtually unchanged from their last close.

Crude output

US crude production has risen by 15 per cent since mid-2016 to 9.66 million barrels per day (bpd), not far from top producers Russia and Saudi Arabia, and increasing drilling activity for new production means output is expected to grow further, traders said.

US energy companies had last week added oil rigs, with the monthly rig count rising for the first time since July, to 747 active rigs, as producers are attracted by climbing crude prices.

WTI touched a 2015-high on Friday at $59.05 a barrel, partly driven higher by the closure of the 590,000 bpd Keystone pipeline connecting Canada's oil sand fields with the United States following a spill, which reduced stocks.

Longer cuts expected

In global markets, Brent crude oil futures were stronger than WTI due to an effort by the Organization of the Petroleum Exporting Countries (OPEC) and a group of other producers, including Russia, to withhold 1.8 million bpd of output since January.

The deal to cut output expires in March 2018, but OPEC will meet on November 30 to discuss its policy.

“We expect a six- or nine-month extension of the OPEC deal to be agreed to on November 30, but the extension length is less important than the quota level ... On November 30, member countries are unlikely to provide clarity on production levels in 2018,” Barclays bank said on Monday.

“Significant swing potential revolves around the flexible four: Saudi Arabia, Russia, UAE, and Kuwait. Other participants are unlikely to veer from their current output trajectories, in our view,” the British bank added.

Russian Energy Minister Alexander Novak had said on Friday that Russia would discuss the details of an extension on November 30, but made no mention of how long this should last beyond its March expiry.

The uncertainty of how committed Russia is to ongoing cuts, as well as rising production in the United States, mean crude prices are being prevented from rising much further, traders said.

“There is plenty of room for disappointment ... Should the outcome of the next OPEC meeting fall short of expectations, the large net-long speculative position on oil futures can unwind, sending prices lower and volatility higher,” French bank BNP Paribas warned.

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