Oil prices fell from a two-month high on Tuesday as investors once again began to doubt OPEC's ability to curtail production and make a dent in the global supply glut.
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Light, sweet crude for September delivery settled down $1.01, or 2%, to $49.16 a barrel on the New York Mercantile Exchange, snapping a six-session winning streak that led prices above $50 a barrel for the first time since May 24. Brent, the global benchmark, fell 94 cents, or 1.8%, to $51.78 a barrel.
Signs of increasing production from the Organization of the Petroleum Exporting Countries have negated reassuring rhetoric by leading member Saudi Arabia, analysts said, which has announced plans to cap exports and enforce compliance in curtailing output.
The cartel, along with several other major oil-producing nations, agreed to cut production late last year and have extended the deal through March 2018. Still, prices have dropped in 2017 as market players become more doubtful of OPEC's influence on global crude stocks. Meanwhile, U.S. shale activity has ramped up in response, helping offset the cuts from OPEC.
A Reuters survey this week showed OPEC production climbing in July to the highest level since December 2016, as Libya increased supply and some members slipped in compliance with the deal.
"The realization that OPEC oil production is at its highest level this year is undercutting some of the recent strength," said John Kilduff, founding partner at Again Capital. "I think there's a lot of skepticism."
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Cargo tracking data has also indicated that OPEC exports increased in July despite the production deal, according to Robbie Fraser, commodity analyst at Schneider Electric.
"You've got the market really hesitant at this point to make any decisive move above $50 a barrel," Mr. Fraser said.
Traders will be watching for storage data from the U.S. Energy Information Administration, due at 10:30 a.m. ET on Wednesday. Prices have rallied in recent weeks on signs of declining supply in the U.S. as stockpiles have fallen six out of the past seven weeks.
Recent gains have also prompted some traders to take profits ahead of the EIA data, said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates.
Analysts and traders surveyed by The Wall Street Journal expect on average that crude stockpiles will decline by 3.1 million barrels in the week ended Friday.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 1.8 million-barrel increase in crude supplies, a 4.8 million-barrel fall in gasoline stocks and a 1.2 million-barrel decrease in distillate inventories, according to a market participant.
The storage reports are "especially big right now," Mr. Fraser said. "If you want to point to a single justification of why prices have been able to claw their way back...those stock draws are really going to need to keep happening."
The closing of Europe's largest oil refinery also raised some speculation that a decline in consumption of crude from refiners could hurt oil demand. Royal Dutch Shell PLC, the operator, said the facility may not reopen until later this month.
Neanda Salvaterra contributed to this article.
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(END) Dow Jones Newswires
August 01, 2017 17:15 ET (21:15 GMT)