U.S. oil prices fell sharply Monday, retreating from two year highs, as investors re-set assumptions for domestic crude production and braced for a key meeting of OPEC leaders later this week in Vienna.
West Texas Intermediate crude futures for January delivery were marked 2% lower at $57.73 each in early New York trading while Brent contracts for the same month, the global benchmark, were seen 0.82% lower at $63.32.
Much of Monday's decline was pegged to a stronger-than-expected tally of U.S. rig installations published last week by Houston-based oil services provider Baker Hughes (BHI) , which showed the first monthly increase -- to 747-- since July. U.S. production is also running at a record high 9.66 million barrels per day, according to the Energy Information Administration.
Markets are likely to get near-term price support from this week's OPEC summit in the Austrian capital, where reports suggest leaders of the oil producing cartel, as well as Russia, will agree to extend their 1.8 million barrel per day production cut from March until the end of 2018 in order to address what they have said is a supply glut in global markets.
U.S. prices may also find a floor on the back of an announcement from TransCanada Corp. (TRP) - Get Report , which operates the Keystone XL pipeline, has not yet determined when it will be able to get back to normal operations on the distribution network,.
The company has recovered about 44,400 gallons, or 1,057 barrels, of oil after a spill on the pipe in South Dakota Nov. 16, TransCanada said in an update. But it remains unclear when the 590,000-barrel-per-day Keystone pipeline will return to normal operations.
A team of 170 people have worked round-the-clock on the cleanup following the 5,000-barrel spill on the Keystone pipeline, which connects Alberta's oil sands with U.S. refineries.
TransCanada said preliminary work to expose and extract the damaged section of the pipeline began Thursday, Nov. 23, and was expected to be completed by Sunday, Nov. 26. Additional excavation is set to continue beyond the initial portion for soil remediation purposes, the company said.
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