* OPEC output cut extension likely, says Saudi energy
* Saudi says will do "whatever it takes" to balance oil
* Russia says debating output cut beyond 2017 with others
* Relentless rise in U.S. drilling saps market confidence
* Investors cut bullish bets on both benchmarks to Nov lows
(Updates throughout, new quotes, adds context, changes byline,
changes dateline from London)
By Julia Simon
NEW YORK, May 8 Oil prices edged down in a
volatile trade on Monday despite Saudi Arabia's oil minister
saying that he expected OPEC and its partners to consider
extending their deal to cut supply possibly into next year to
end a global glut.
Growing U.S. drilling and production have played a role in
undermining the efforts of the Organization of the Petroleum
Exporting Countries and non-OPEC producers, such as Russia, to
reduce global oil inventories with an output cut of 1.8 million
barrels per day (bpd) during the first half the year.
Saudi Energy Minister Khalid al-Falih said oil producers
would "do whatever it takes" to rebalance the market and that he
expected a global deal on cutting crude output to be extended
through all of 2017 and possibly into next year.
News that the curbs may be extended into 2018 fuelled a
short-lived rally in the market, but oil gave up the gains
quickly amid pessimism on how long it will take to drain
brimming oil inventories.
Brent crude was down 8 cents at $49.02 a barrel at
1:45 p.m. EDT (1745 GMT). U.S. light crude was down 6
cents at $46.16 a barrel.
"The market is getting tired of hearing from OPEC how good
they are, how compliant (with supply curbs) they are and
especially how all their projections for inventories falling
seemed to be moved into the future," said Eugen Weinberg, head
of commodity research at Commerzbank.
"Those claims do not withstand the reality check with the
inventories staying stubbornly high and non-OPEC production
Russia also said it was discussing prolonging cuts with
other producers beyond 2017.
OPEC will review the cuts at a meeting in Vienna on May 25.
If the supply curbs are extended, then OPEC will likely
struggle to keep its members adhering to the their output
targets, Weinberg said.
"Compliance rates, in my opinion, will not be as high as
they were in past months."
The Saudi oil minister said recent price falls had been
caused by seasonal low demand and refinery maintenance, as well
as by non-OPEC production growth, especially in the United
U.S. energy companies last week extended a recovery in oil
drilling into a 12th month, energy services firm Baker Hughes
Inc said on Friday. RIG-OL-USA-BHI
Since a low point in May 2016, U.S. producers have added 387
oil rigs, growing about 123 percent, Goldman Sachs said.
U.S. oil production C-OUT-T-EIA has soared more than 10
percent since mid-2016 to 9.3 million bpd, its highest since
August 2015 and close to the levels of top producers Russia and
Many analysts now see U.S. crude output heading towards 10
million bpd over the next year.
"It's all about inventories and U.S. shale versus OPEC,"
said Hussein Sayed of brokerage FXTM. "OPEC members have no
choice but to talk up prices by signalling an extension to the
production cuts agreement."
In the week to May 2, investors cut their bullish bets on
Brent to the lowest level since late November, while hedge funds
and money mangers also cut gross long positions in U.S. crude
futures for the second straight week, to the lowest since early
(Additional reporting by Christopher Johnson and Karolin Schaps
in London, Henning Gloystein in Singapore; Editing by Marguerita
Choy and Dale Hudson)