Oil prices fell on Monday, releasing fleeting gains made after the Saudi Arabian cabinet reiterated its commitment to work with other producers, as a firm dollar and concern over global oversupply reasserted themselves.
Prices rallied briefly after Saudi Arabia said in a statement the kingdom remained ready to work with other producing and exporting countries to stabilize prices.
U.S. West Texas Intermediate (WTI) crude futures were down 44 cents a barrel at $41.45 a barrel, having touched a session high of $42.75 following the Saudi statement.
Benchmark January Brent futures were last down 3 cent at $44.63 a barrel. The price hit an intraday high of $45.73 earlier in the session.
"Nobody really believes Saudi Arabia will bow to pressure (to cut output)," Commerzbank strategist Carsten Fritsch said.
"In that case, they would surrender all their efforts, or any success they had achieved so far in the last 12 months and any pain would have been for nothing," he said.
Oil prices have halved over the last 12 months after OPEC decided to maintain its production levels, or even increase them, to retain market share, in part by forcing higher-cost producers elsewhere to cut output.
Saudi Arabia has previously said it is willing to cooperate with other oil producers to maintain oil price stability, but the comments on Monday arrived as futures prices were barely holding above 2-1/2 month lows.
Big hedge funds have increased their bets that oil will continue to fall, according to data from the U.S. Commodity Futures Trading Commission (CFTC) last week.
Speculators now hold more positions that are betting on a drop in the oil price than at any time since at least 2009, according to Reuters data.
Morgan Stanley`s commodities research team said they expected to see a rise in the physical market towards the end of the year, as refinery margins remain robust and maintenance schedules for next month are expected to be light.
But this might not be enough to underpin the broader market, they said. "As long as markets are oversupplied, even if it`s by a shrinking amount, technical factors and the U.S. dollar will remain the primary price-setting mechanisms," they said.
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