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Crude slips on rig count; supply concerns in focus

Singapore — Crude oil futures slips during mid-afternoon trade Monday on the back of higher rig counts in the US, but supply concerns remained in focus for now, industry sources said.

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At 2:35 pm Singapore time (0635 GMT), the June ICE Brent crude futures were down 10 cents/b (0.14%) from Friday's settle at $71.45/b, while the NYMEX May light sweet crude contract also slid 25 cents/b (0.39%) at $63.64/b.

According to the Baker Hughes rig count Friday, oil drillers added two rigs, bringing the total number of active oil rigs in the US to 833.

The small increase built upon last week's 15-rig addition to bring the nationwide oil rig count up to a four-week high.

Meanwhile, global growth concerns also capped prices, industry sources said.

"ECB President Draghi at the IMF-World Bank meeting said the key message of IMF meeting is that there will be a significant growth slowdown this year and that global recovery in 2020 is subject to significant risk," UOB said in a note Monday.

"He provided some optimism noting that some of the idiosyncratic factors weighing on growth are waning although factors that are undermining confidence are still looming large," UOB added.

Despite this, market participants felt that supply constraints led by OPEC production cuts and US sanctions on Venezuela and Iran could sent crude prices higher.

On that note, Iranian oil minister Bijan Zanganeh warned Sunday that a possible US refusal to renew waivers for the OPEC member's crude buyers after May would disrupt the global oil market, the ministry's official news service Shana reported.

"If the US wants to add to the pressures on Iran, the oil market will become more fragile in an unpredictable way," Zanganeh said, according to Shana, which was quoting from an interview on state radio.

"What's important is that the market situation is fragile," Zanganeh said. "It's not like supply is much higher than demand, or there is even a lot of surplus capacity."

Iranian production has dropped to around 2.69 million b/d from around 3.8 million b/d in mid-2018 as a result of the US re-imposing sanctions on the Islamic Republic's crude exports. Waivers from those sanctions were granted to eight of Iran's biggest oil buyers until May 4.

As of 0635 GMT, the US Dollar Index was 0.06% lower at 96.495.

--Ng Jing Zhi, jz.ng@spglobal.com

--Edited by Norazlina Juma'at, norazlina.jumaat@spglobal.com