Oil Slips Lower Amid Debate on U.S. Shale Oil Recovery


NEW YORK, May 11 (Reuters) - Oil edged lower on Monday on signs that a multi-week rally was encouraging a rejuvenation in already bloated U.S. shale supplies, even as the government expected less output in June from the fastest-growing fields.

Last week, U.S. crude prices gained on a weekly basis for an eighth straight week while Brent had its decline after four weeks of gains.

In a sign that the market was responding to those price gains, rigs for drilling oil in the voluminous Permian shale basin rose last week for the first time this year after months of cutbacks.

Still, the U.S. Energy Information Administration expects output from the fastest-growing U.S. shale plays to drop 71,000 barrels per day in June to 4.97 million bpd.

"It's pretty choppy as people try to figure out a clearer supply-demand situation," said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.

While he was not a believer of the recent market runup, McGillian said there were no signs the rally was over and "we could ultimately be setting ourselves up for an even sharper decline later".

U.S. crude futures settled down 14 cents at $59.25 a barrel.


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