Investors cut their bullish bets on the oil price to the lowest level since OPEC reached a deal to cut output previous year, amid continued doubts about the effectiveness of that agreement.
The drop in speculative holdings of crude oil futures did not cover the remainder of last week, in which the price fell by 5 percent, when a wave of selling hit the market. USA light crude was 30 cents higher at $46.52. But the supply picture had more bearish news.
In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices.
OPEC's subsequent agreement with non-OPEC producers made this explicit by stating output would be cut from January 1 for six months with the option to extend the curbs for a further six months.
"The market is in a very unsafe condition", said Robin Bieber, technical chart analyst at London brokerage PVM Oil Associates.
Data from the InterContinental Exchange on Monday showed investors cut their bullish bets on Brent to the lowest level since late November.
The move was also partly matched by non-cartel producers led by Russian Federation and the critical question is whether OPEC will extend the deal for another six months or even beyond at its next meeting on May 25.
The world's biggest oil producers Russian Federation and Saudi Arabia today eyed up extending an output reduction deal ahead of an OPEC meeting later this month.
USA drilling continued to pick up last week, with the rig count climbing by 6 to 703. Analysts at Simmons & Co, energy specialists at USA investment bank Piper Jaffray, this week forecast the total oil and gas rig count would average 855 in 2017, 1,056 in 2018 and 1,176 in 2019.
On the demand side, China's crude oil imports in April eased by nearly 9 percent from March to 8.37 million bpd, although this was largely due to refinery maintenance.
Many analysts now see US crude output heading towards 10 million bpd over the next year or so.
In global oil markets US inventories are considered as a trusted indicator for their data transparency & their place in the country which consumes around a fifth of the world's oil.
OPEC meets on May 25 and the group's ministers have been talking up the chances of more production cuts.
He said oil prices would probably rally "but the recovery won't be a straight line".