Oil prices recovered slightly on 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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Brent crude, the global oil benchmark, rose 0.5% to $48.65 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.4% at $46.19 a barrel.
Total U.S. shale production will likely notch a 113,000 barrels 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 gains.
Investors are awaiting stocks data from industry group the American Petroleum Institute, due later Tuesday.
The increases come as the market remains concerned about still-bloated global inventories, which show little sign of shrinking despite an ongoing production cut pact by the Organization of the Petroleum Exporting Countries and other heavyweights, such as Russia.
"With little sign of the OPEC-shale tug of war drawing to an end, the scene is now set for a period of range-bound trading as market players wait for the next price catalyst," said Stephen Brennock at brokerage PVM.
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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, and gasoline and distillates to have fallen by 500,000 and 700,000 barrels respectively last week.
Adding to the oversupply concerns is Ecuador's decision not to 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 participants in the OPEC-led cuts may also turn their backs on the 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.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.1% to $1.56 a gallon. ICE gasoil changed hands at $445.76 a metric ton, down $2.75 from the previous settlement.
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(END) Dow Jones Newswires
July 18, 2017 06:01 ET (10:01 GMT)