SINGAPORE (Reuters) – Oil prices fell 1 percent on Wednesday, with rising U.S. fuel inventories pulling U.S. crude back below $50 per barrel, while ongoing high supplies from producer club OPEC weighed on international prices.
U.S. West Texas Intermediate (WTI) crude futures were at $48.68 per barrel at 0303 GMT, down 48 cents, or 1 percent, from their last settlement. That came after the contract opened above $50 for the first time since May 25 on Tuesday.
Brent crude futures, the international benchmark for oil prices, were down 47 cents – almost 1 percent – at $51.31 per barrel.
“The coup de grace came from the American Petroleum Institute’s (API) Crude Inventory release late in the New York session…bringing an end to the last few weeks’ trend of falling supplies in storage,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“Traders stampeded for the door to lock in profits from the last eight days’ bull-run,” he added.
The API said that U.S. crude stocks rose by 1.8 million barrels in the week ending July 28 to 488.8 million, hitting hopes that recent inventory draws were a sign of a tightening U.S. market.
Official storage figures are due to be published by the U.S. Energy Information Administration (EIA) late on Wednesday.
Outside the United States, prices were pegged back by a survey this week that showed production by the Organization of the Petroleum Exporting Countries (OPEC) hit a 2017 high of 33 million barrels per day (bpd) – despite its pledge to restrict output together with other OPEC producers, including Russia, by 1.8 million bpd between January this year and March 2018.
Because of rising output, energy consultancy Douglas Westwood said oversupply would return soon, and last for years.
“Oversupply will actually return in 2018. This is due to the start-up of fields sanctioned prior to the downturn,” said Steve Robertson, head of research for the firm’s Global Oilfield Services. “This is in addition to the production gains through increased investment and activity in the U.S. unconventional (shale) space.”
Douglas Westwood said it expected oversupply to last until 2021.
Robertson said that “external factors such as major interruptions to supply from political or weather-related events can shift the balance quickly”.
But he warned that “any expectations of recovery based upon optimism or wishful thinking along ‘it always bounces back’ should be tempered by a reality check, and the very real possibility that the current recovery could take much longer to materialize”.
Reporting by Henning Gloystein; Additional reporting by Keith Wallis in LONDON; Editing by Joseph Radford and Kenneth Maxwell