Oil prices inched lower on Wednesday, weighed down by a bearish U.S. inventory forecast and concerns about major oil producers' wavering commitment to output caps.
Brent crude, the global oil benchmark, fell 0.15% to $51.70 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.16% at $49.07 a barrel.
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On Tuesday the American Petroleum Institute, an industry group, projected that U.S. crude inventories rose 1.8 million barrels last week. That runs counter to another decline that analysts anticipate in weekly government data due later Wednesday.
Analysts at Commerzbank say that the rebalancing sought in the oil market will take more time and attributed the swelling in U.S. inventories to "a sharp rise in imports, which likewise suggests that crude oil is still in plentiful supply."
Last year the Organization of the Petroleum Exporting Countries and external allies such as Russia agreed to eliminate about 2% of the global to prop up oil prices and reduce a global glut.
But crude prices have actually fallen by 9.8% in the last six months, and news that major oil producers are struggling to keep their pledges have unnerved investors.
"Prices are running out of steam," said Eugen Weinberg, an analyst at Commerzbank. "The discipline of OPEC countries must be cast into question."
Citing a survey, Reuters reported that July output among members of the Organization of the Petroleum Exporting Countries hit the highest level of 2017.
OPEC member such as Iraq said it exported 3.2 million barrels per day.
Iran reported exports amounting to more than 2.2 million barrels per day, while Libya's international sales rose to 865,000 barrels per day--"its highest export volume in three years," noted Commerzbank analysts.
The oil cartel is scheduled to hold a two-day meeting next week to review members' commitments to the production caps they have agreed to. Several smaller producers, such as Ecuador, have already voiced their dissension, saying they don't have economic prowess to keep sidelining production amid low prices.
Official OPEC monthly data will be released next Tuesday.
Traders are also watching for unsettling signs that the more North American crude is coming online.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.26% to $1.66 a gallon. ICE gasoilchanged hands at $487.75 a metric ton, down $3.25 from the previous settlement.
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Oil prices rose Wednesday after U.S. data showed that crude inventories continued to shrink and gasoline demand climbed to a record last week.
U.S. crude futures settled up 43 cents, or 0.87%, to $49.59 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 58 cents, or 1.12%, to $52.36 a barrel on ICE Futures Europe.
Oil prices have been moving higher, albeit on a rocky path, in recent weeks. Prices topped $50 a barrel Monday for the first time in two months, but the rally came to an abrupt halt Tuesday.
"It hasn't been the easiest uptrend for someone to stay long," said Ric Navy, senior vice president for energy futures at RJ O'Brien & Associates LLC.
The U.S. Energy Information reported that oil inventories fell by 1.5 million barrels last week. Prices initially fell after the data was released, as the decline was less than half of the 3.1 million barrel drop that analysts and traders surveyed by The Wall Street Journal had predicted. But a larger-than-anticipated drop in gasoline stockpiles and strong fuel demand figures eventually won out and prices moved higher.
"The fact of the matter is that inventories did continue to decline," said Andy Lipow, president of Lipow Oil Associates. "Refiners have kicked up their utilization again and continue to turn the crude oil into products in response to very good demand," he said.
Gasoline stockpiles fell 2.5 million barrels last week, dwarfing the 500,000 barrel draw analysts had forecast as demand rose to a record of 9.84 million barrels a day, according to EIA data.
Market participants pay close attention to the weekly U.S. inventory data, looking for signs that a glut that has weighed on the market is shrinking, after the Organization of the Petroleum Exporting Countries and external allies such as Russia agreed to cut production last year.
Still, some said oil prices are likely to run into an upper bound.
"I think we're basically range bound," said Tariq Zahir, managing member of Tyche Capital Advisors. "You've got a lot of bearish factors."
One of those factors is U.S. oil production, which rose last week by 20,000 barrels a day, according to the EIA. Even though oil futures didn't spend much time above $50, the rising prices likely encouraged a new wave of hedging by companies that use futures contracts to lock in prices for their output, Mr. Zahir said. That could have long-term implications for the market if it allows U.S. producers to keep pumping profitably.
And while gasoline demand has been relatively strong, many are looking ahead to September, which brings the end of summer driving season. When demand slows, the high levels of fuel that refiners have churned out could become a weight on the market, said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy trading desk.
Gasoline futures fell 1.65 cents, or 0.99%, to $1.6448 a gallon. Diesel futures rose 1.75 cents, or 1.07%, to $1.6588 a gallon.
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(END) Dow Jones Newswires
August 02, 2017 15:55 ET (19:55 GMT)