Oil inches up in quiet holiday trade, focus on crude glut

By Nia Williams (Reuters) - Oil prices rose slightly on Monday, barely paring last week's steep losses with the market remaining cautious as increases in U.S. drilling activity have undercut an OPEC-led push to tighten supply. Trading was subdued due to public holidays in China, the United States and Britain. The market remains uncertain about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices. Brent crude futures settled up 14 cents, or 0.2 percent, at $52.29 per barrel. Brent fell nearly 3 percent the previous week. U.S. West Texas Intermediate (WTI) crude futures were 19 cents higher at $49.99 per barrel. The Organisation of the Petroleum Exporting Countries and some non-OPEC producers pledged last week to extend production cuts of around 1.8 million barrels per day (bpd) until March 2018. An initial agreement, in place since January, would have expired in June. "This is a little bit of a bounce back from last Thursday when we had a really heavy drop," said James L. Williams, an energy economist at WTRG Economics in Arkansas. Nine months of current production levels is not going to be enough to meet OPEC's goal of balancing supply, which is limiting price gains, he added. Commerzbank analyst Carsten Fritsch called Monday's price moves little more than "intraday noise." High compliance with the cuts so far was unlikely to last, he said, which should keep physical oil stockpiles near record levels. So far the output cuts have not lifted oil prices much beyond $50 per barrel. While OPEC and other countries including Russia are trying to draw down inventories, crude production has surged in the United States , up 10 percent since mid-2016. U.S. output of more than 9.3 million bpd is close to levels in major producers Russia and Saudi Arabia. U.S. drillers have added rigs for 19 straight weeks, bringing the total 722, the highest since April 2015 and the longest run of additions on record, according to energy services firm Baker Hughes Inc . Even if the rig count did not rise further, Goldman Sachs estimated U.S. output would increase by 785,000 bpd between the fourth quarter of 2016 and the fourth quarter of 2017 across the Permian, Eagle Ford, Bakken and Niobrara shale plays. Analysts will watch whether the OPEC output cuts can reduce the global crude glut. "It's going to be all about inventories and whether they fall as much as OPEC thinks," said Greg McKenna, chief market strategist at futures brokerage AxiTrader. (Additional reporting by Libby George in London and Henning Gloystein; in Singapore; Editing by Marguerita Choy and David Gregorio)