Oil is poised for its first monthly decline in half a year as January’s rally fades on growing fears over booming U.S. shale supply.

Futures in New York were little changed, putting them on course for a 2.8% drop in February. An industry report was said to show U.S. oil inventories rose last week, which would be the fourth expansion in five weeks if confirmed in government data. The head of OPEC plans to dine with shale producers in Houston next week at a time when America is pumping at record levels and threatening the group’s efforts to curb a global glut.

After the best start to the year in more than a decade, oil has had a tumultuous month. Prices tumbled early in February following a global asset rout, only to recoup some losses as equities rebounded. While output curbs by the Organization of Petroleum Exporting Countries, a supply disruption in Libya and turmoil in Venezuela have helped underpin prices, expanding U.S. shale production continues to haunt the market.

“Basically what investors are weighing is U.S. shale versus OPEC right now,” Tamas Varga, analyst at PVM Oil Associates Ltd said by phone. “It’s not clear yet who will be the winner as U.S. oil production keeps going higher despite the OPEC cuts.”

West Texas Intermediate for April delivery fell 3 cents to $62.98 a barrel on the New York Mercantile Exchange as of 11:09 a.m. in London, on course for the first monthly decline since August. The drop this month comes after prices rallied 37% in the five months through to the end of January. Total volume traded was about 21% below the 100-day average.

Brent for April settlement, which expires Wednesday, dropped 4 cents to $66.59 a barrel on the London-based ICE Futures Europe Exchange. The contract lost 1.3 percent, or 87 cents, on Tuesday. The more-active May contract gained 7 cents to $66.59. The global benchmark crude traded at a $3.70 premium to April WTI.

U.S. Data

The American Petroleum Institute was said to report U.S. oil stockpiles rose by 933,000 barrels last week. Government data Wednesday is forecast to show inventories rose by 3 million barrels, according to a Bloomberg survey.

U.S. crude output is forecast to rise to a record level in February, stoking fears that shale producers may derail OPEC’s strategy of reducing output to clear a global glut. The producer group’s Secretary General Mohammad Barkindo said he will meet with U.S. shale company executives for dinner on Monday in Houston, the second time he has met with some of the cartel’s top rivals.

Events in OPEC members Venezuela and Libya have also influenced oil’s course this month. Libya’s exports from a key port will be “modified” after protests disrupted production, putting the nation’s output at risk of a decline again. In Venezuela, crude output could fall to 1.1 million barrels a day by year-end, according to consultancy Rapidan Energy Group, as the U.S. leans toward imposing oil-sector sanctions before elections in April. — Bloomberg

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