Oil back above $50 but weakens for first time in three days

Oil prices fell in Asian trade after a strong two-day rally that was fed by easing concerns Britain would leave the European Union after a referendum this week, allowing market participants to focus on supply issues.

US crude's expiring July front-month contract was down 38 cents at $48.99 a barrel at 10.17am UAE time. The more actively traded August contract, the new front-month from Wednesday, was down 16 cents at $49.80. That contract settled up nearly 3 per cent at $49.96 on Monday.

Brent crude futures’ August front-month contract was down 46 cents at $50.19 a barrel.

On Monday, it climbed $1.48, or 3 per cent, to $50.65 a barrel. The contract has risen about 7 per cent since Thursday's settlement, after dropping 10 per cent in six previous sessions.

Two opinion polls released on Monday suggested support for Britain staying in the European Union had recovered some ground following the murder of a pro-EU lawmaker last week, although a third survey found backers for a "Brexit" ahead by a whisker.

While concerns over a British exit fade into the background, however briefly, supply issues are back in focus.

Saudi Arabia's crude oil exports dropped in April despite high production levels, suggesting its battle for market share against US shale drillers may be running its course.

Shale producers eye comeback

With oil prices up more than 30 per cent this year, shale drillers are looking at turning the taps on again.

"Yet while tentative signs of rising drilling activity have materialised in a rising rig count in recent weeks, many producers are nervous about ramping up drilling operations without seeing a period of price stability," Matt Smith, director of commodity research at ClipperData, said in a note.

Potentially adding to supply, Iran has increased its crude exports capacity at its main terminal on Kharg Island to allow eight tankers to load simultaneously, the oil ministry's news agency Shana reported on Monday.

Meanwhile, Nigeria's naira slumped 30 per cent against the dollar on Monday after the country's currency peg was removed to alleviate the chronic foreign currency shortages choking growth in Africa's biggest economy and major oil exporter.

Follow Emirates 24|7 on Google News.