Oil prices recovered slightly in Asian trade Tuesday, after the weeklong rally fizzled overnight on fresh data that showed U.S. production would continue to trend higher this year.
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Total U.S. oil production will likely notch a 113,000-barrel a day rise in August from the previous month to hit 5.585 million barrels a day, according to the Energy Information Administration. If confirmed, this would mark an eighth-straight month of U.S. output gains.
The increases come as the market remains concerned about still-bloated global inventories, which has shown little signs of retreating despite an ongoing production cut pact by the Organization of the Petroleum Exporting Countries and other heavyweights like Russia.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $46.14 a barrel at 0207 GMT, up $0.12 in the Globex electronic session. September Brent crude on London's ICE Futures exchange rose $0.14 to $48.56 a barrel.
Refined oil products were mixed. Nymex reformulated gasoline blendstock was up 0.3% at $1.56 a gallon, while July diesel rose 0.2% to $1.50. July ICE gasoil fell 0.6% to $445.25 a metric ton.
Investors will be watching for the EIA's weekly production and stocks report due Wednesday. S&P Global Platts estimates U.S. commercial stocks to register a 3 million barrel drawdown, while it expects gasoline and distillates to have fallen by 500,000 and 700,000 barrels, respectively, last week.
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Another drop in oil stocks would be encouraging for investors, but the market is worried that the drawdowns could stop once refinery activity dries up in the late summer for planned repairs, while production continues to hike, S&P Global Platts says.
Adding to the oversupply concerns is Ecuador's decision not honor the OPEC-imposed production caps any longer, saying the cash-strapped and debt-ridden country can't afford to keep curtailing its output amid low prices. It had originally pledged to cut 26,000 barrels a day. In May, Ecuador's daily production was at 528,000 barrels a day, around 1.6% of the cartel's total production.
Ecuador's move heightens the possibility that other OPEC states may also turn their backs to the production cut pact, in the wake of rising production from the U.S., Libya, and Nigeria.
All eyes will be on the OPEC meeting in St. Petersburg, Russia, on Monday, when the topic of compliance and possibly adding the two African nations into the production scheme will be discussed.
While a cap on Nigeria and Libya's production at their current levels would boost market sentiment, analysts say they don't expect the revised deal to remove any barrels from the market.
Write to Jenny W. Hsu at email@example.com
(END) Dow Jones Newswires
July 17, 2017 23:02 ET (03:02 GMT)