By Dan Molinski
-- Oil prices declined Monday on investors' concerns that the U.S. and Russia -- two of the world's top oil producers -- could each increase output and beef up recently-tightening global supplies.
-- West Texas Intermediate futures, the U.S. oil benchmark, fell 0.5% to $63.56 a barrel on the New York Mercantile Exchange. Prices hit a five-month closing high of $64.61 a barrel last Wednesday.
-- Brent crude, the global oil benchmark, was down 0.6% at $71.16 a barrel on London's Intercontinental Exchange.
U.S. Rig Count: Oil prices were modestly lower Monday after rig-count data Friday afternoon showed a second-straight weekly increase in the number of active oil rigs in the U.S., which followed six straight weeks of declines. The rig count is used to gauge future oil-production, so the data could suggest that as oil prices hit a five-month high, U.S. oil producers are once again being motivated to ramp up activity and boost U.S. output, which already stands at a record-high 12.2 million barrels a day.
But many analysts said the rig-count uptick may not last, with some noting the overall oil and gas rig count fell again last week. "The U.S. [oil and gas] rig count has now declined seven of the last eight weeks, and we think it will continue to drift lower over the next few months as operators shift their focus to [oil well] completions and maintaining capital discipline," said analysts at Seaport Global in a research note Monday.
Russia: Adding to the selling pressure Monday were weekend reports indicating Russia may also start boosting crude production, despite still being held to a December agreement with the Organization of the Petroleum Exporting Countries to reduce production. "There is a dilemma. What should we do with OPEC: Should we lose the market, which is being occupied by the Americans, or quit the deal?" Russian Finance Minister Anton Siluanov was quoted as saying Saturday, according to Russian news agency TASS.
Despite the concerns out of Russia, Carlo Alberto De Casa at brokerage ActivTrades said Monday's declines are likely just a pause in an otherwise bullish trend for oil prices. "The main trend is still positive, but some investors are taking profit," he said.
Brent $82?: Energy analysts at Bank of America Merrill Lynch said in a research note Monday that they are maintaining their view that Brent crude oil could hit $82 by late June, in part because of new sulfur regulations for shipping fuels, known as IMO 2020, to make them more environmentally friendly.
"The end of the Fed's monetary policy tightening cycle, coupled with a very steep drop in OPEC-plus oil production, kept us bullish on global crude oil prices," they said. "Now, with distillate inventories at the low end of the range, we see an analogy to 2007/08 when the world ran out of diesel refining capacity. Back then, as Saudi Arabia lifted heavy crude production to meet rising global demand for distillates, diesel-to-bunker fuel spreads blew out and so did light-heavy crude spreads. A similar situation could develop over the coming months as shipowners temporarily up their distillate burn to transition out of high sulphur into ultra low sulfur bunker fuel due to the new IMO 2020 rules."
-- The Energy Information Administration is set to release its monthly Drilling Productivity Report late Monday.
Write to Dan Molinski at Dan.Molinski@wsj.com