Oil prices fell on Thursday, weighed down by oversupply, but losses were limited by expectations that major exporters would agree to extend production cuts to try to rebalance the market.
Benchmark Brent crude was down 30 cents at $51.52 a barrel by 0800 GMT, almost 9 per cent below this month’s peak. US light crude was down 35 cents at $49.27.
Traders reported ample supplies in all key markets despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to cut output by 1.8 million barrels per day (bpd) in the first half of the year to tighten the market and prop up prices.
OPEC is discussing extending its cuts into the second half of the year, but the group has an uphill task as oil inventories are near record levels in many parts of the world.
“It is clear that the world has plenty of oil in stock, making OPEC’s life that much harder,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
US data on Wednesday showed a drop in crude oil stocks, but gasoline inventories surged as refiners produced more fuel than the market could consume.
“US commercial stocks increased by more than 6.5 million barrels last week,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates. “Stock rebalancing has been put on hold as US commercial oil inventories have jumped.”
US crude oil production is also rising, up 10 per cent since mid-2016 at 9.27 million bpd.
Rystad Energy expects US shale oil output to grow by 100,000 bpd each month for the rest of this year and into 2018 if oil prices hold around $50-$55 a barrel, well above estimates by the US Energy Information Administration for monthly gains of about 29,000 bpd in 2017 and 57,000 bpd in 2018.
“We see a risk for a weaker oil price towards the end of the year … because shale is delivering so much oil,” Jarand Rystad told Reuters.
Still, with an expectation that OPEC will extend its production cuts to cover all of 2017, analysts said there was support for prices around current levels.
“Brent oil looks neutral in a range of $51.30 to $52.32,” said Reuters technical commodities analyst Wang Tao.