Oil prices fell on Thursday, reversing gains as investors grew doubtful that enough crude is being consumed to end a global glut.
Light, sweet crude for September delivery settled down 56 cents, or 1.1%, at $49.03 a barrel on the New York Mercantile Exchange, closing at a one-week low. Brent, the global benchmark, settled down 35 cents, or 0.7%, to $52.01 a barrel.
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On Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell by 1.5 million barrels in the week ended July 28, falling short of analyst expectations. Meanwhile, U.S. production climbed to a two-year high.
Prices climbed earlier in the session, as market participants weighed declining crude in storage and record gasoline demand against a continued supply glut. According to analysts, concerns over the waning influence of the Organization of the Petroleum Exporting Countries still weigh on the market.
The global oil cartel agreed to cut production late last year and have extended the deal through March 2018. However, reports show compliance has been declining, and members exempt from the deal, such as Libya and Nigeria, have continued contributing to market supply.
"I still think there's this big concern that OPEC is going to start losing it here a little bit," said Dominick Chirichella, an analyst at the Energy Management Institute.
The recent rally in oil has stalled after rising seven out of the past nine sessions, as traders have looked for more conviction that supply is declining.
"The rally we've seen is showing some signs right now that it's kind of running it's course," said Gene McGillian, research manager at Tradition Energy. "We need signs that the oversupply...is basically beginning to be taken out of the market."
Prices have struggled to climb above $50 a barrel since May, in part because higher prices could push U.S. shale producers to lock in future prices and ramp up activity again.
"Recent producer hedging activity targeting the 2018 tenor is indicative of further improvements in economics from cost-cutting and efficiency gains," RBC Capital Market analysts wrote in a Thursday report. "A key and present threat for oil prices lies in whether current hedging activity is ultimately defeating for prices."
Gasoline futures settled down 0.8%, at $1.6319 a gallon, and diesel futures fell 1.2%, to $1.6389 a gallon.
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(END) Dow Jones Newswires
August 03, 2017 17:49 ET (21:49 GMT)