Oil extends gain on supply cut, weak economy strains outlook

Oil extends gain on supply cut, weak economy strains outlook

There is a risk that oil prices could drop to as low as $30 a barrel because OPEC and its Russia-led allies could produce more oil by the end of the year than market demand, said Russia's Energy Minister Alexander Novak.

United States withdrawal of tariff threat against Mexico removed cloud over global economy.

Front-month Brent crude futures, the worldwide benchmark for oil prices, were at $63.61 at 0411 GMT, 32 cents, or 0.5%, above Friday's close.

Rig counts in the U.S., an indicator of upstream investment activity, also fell to their lowest since February, pushing the West Texas Intermediate to above $54 per barrel.

Oil prices steadied on June 10 as major producers Saudi Arabia and Russian Federation had yet to agree on extending an output-cutting deal and U.S.

Never the less, despite Monday's (June 10th) rally traders still remained cautious over the health of a contracting global economy, which had pulled the plug off of a further bull-run of crude oil despite a considerable extent of production cut.

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All eyes will be on the upcoming The Organization of the Petroleum Exporting Countries (OPEC) meeting during June 25-26, when it decides its output policy for the rest of the year.

"With China slowing, the European Union sickly and the USA data starting to wobble, an economic downturn remains a clear and present danger", said Stephen Innes, managing partner at Vanguard Markets. Optimism on Brent crude, the global benchmark, declined by the most this year.

On the demand side, analysts expect fuel consumption growth to stutter along with the global economy.

Stock markets rose on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week removed the threat of U.S. tariffs on goods imported from Mexico.

China's crude oil imports slipped to around 40.23 million tonnes (9.47 million barrels per day), down from an all-time peak of 43.73 million tonnes in April, customs data showed on Monday, as the world's top importer of the commodity curbed shipments from Iran amid tighter USA sanctions.