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Crude oil prices fell on Monday as markets were expected to be increasingly oversupplied following OPEC's decision to keep its production targets unchanged.
The Organization of the Petroleum Exporting Countries (OPEC) agreed on Friday to stick to its policy of unconstrained output, which currently stands above 30 million barrels per day, contributing to a market that is already seeing millions of barrels of crude stored in tankers without a buyer.
"The world's crude demand/supply remains in excess supplies," said Yasushi Kimura, president of the Petroleum Association of Japan (PAJ) after OPEC's decision.
"OPEC projected a continuation of firm demand in global crude demand and judged there's no need to change current production levels. The decision also may have come about reflecting the view that OPEC's lone production cuts would be offset by rising U.S. shale oil production," he added.
Front-month Brent futures dropped 51 cents to $62.80 a barrel at 0227 GMT. U.S. crude was at $58.57 per barrel, down 56 cents.
OPEC ministers said the group may even exceed the 30 million bpd target, especially if there is an increase in production and exports from Libya, Iraq or Iran.
"We forecast that Saudi and other low-cost producers will continue to increase output as this is the next logical step to maximising revenues in the face of shale oil's scalability," Goldman Sachs said, adding that the global oil market would remain oversupplied in 2016 due to increased production from OPEC, Iraq and Russia.
"For now, the group will wait for lower prices to curb non-OPEC supply growth to stimulate global demand," Barclays said.
There are doubts, however, whether that strategy will work as analysts expect U.S. drilling to start increasing again in the second half of this year following 26 weeks of declines.
Drilling fell after crude prices dropped to six-year lows in January, but a modest recovery and reduced operating costs are allowing U.S. drillers to operate at costs that would have been previously unviable.
On the demand side, analysts said it would be key to watch refinery margins, which have been high this year because of cheap crude and strong demand, especially in Asia.
"Growing product stocks or weaker product structure and cracks would be evidence of either slowing product demand or refiners oversupplying product markets - both of which would be a negative indicator for crude demand," Morgan Stanley said.
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