SINGAPORE (Reuters) – Oil prices were stable on Thursday after posting strong gains late in the previous session on the back of a drop in U.S. crude inventories.
Another rise in U.S. oil production, which is close to breaking through 10 million barrels per day (bpd) is capping crude prices as it undermines efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to tighten the market through withholding output this year and next.
U.S. West Texas Intermediate (WTI) crude futures were at $58.05 a barrel at 0126 GMT, down 3 cents from their last settlement.
Brent crude futures, the international benchmark for oil prices, were at $64.58 a barrel, down 8 cents.
Both crude benchmarks gained around 1 percent during the previous session.
Traders said falling U.S. crude oil inventories were supporting the market.
U.S. crude inventories fell by 6.5 million barrels in the week to Dec. 15, the Energy Information Administration (EIA) said on Wednesday. Overall crude stocks, excluding the U.S. Strategic Petroleum Reserve, fell to 436 million barrels, the lowest since October, 2015.
The rebalancing of supply and demand is a result of OPEC and Russian led voluntary production cuts.
Despite this, the energy minister of Saudi Arabia, the world’s top crude exporter and OPEC’s de-facto leader, said it would take more time to rein in the global supply overhang, which was created by strong global production increases in the years up to 2015.
“We expect the first few months of 2018 to be either flat or a build (in inventories) as it is typically the case with the seasonality with the oil market,” Saudi Arabia’s energy minister Khalid al-Falih told Reuters on Wednesday.
OPEC’s and Russia’s efforts to rebalance markets and prop up prices are being undermined by rising production in the United States, which does not participate in the deal to cut.
U.S. crude production hit 9.79 million bpd last week, its highest since the early 1970s, the only time American production breached 10 million bpd.
This brings U.S. output close to that of top producers Saudi Arabia and Russia, which pump around 10 and 11 million bpd.
Oil traders this week eyed with interest the passing of a U.S. tax bill, which is seen to weigh on crude prices in the longer term.
“The passage of the U.S. tax bill is … a bearish long-term development for oil and gas markets. The policies … are likely to reduce demand for gas and oil and raise supplies … (as) the tax bill preserves renewable energy tax credits, a tax credit for EVs (electric vehicles), and opens up drilling in the Arctic National Wildlife Refuge,” Barclays bank said.
Reporting by Henning Gloystein; Editing by Joseph Radford