Crude futures extended overnight declines in Asia on Wednesday, partially undoing more than a week straight of gains as reality regarding supplies comes back into view.
The market had taken a glass-half-full perspective last week amid pronouncements of major producers sticking with ongoing production cuts and Saudi Arabia planning to reduce oil exports this month.
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But the cautious view returned Tuesday as, citing a survey, Reuters reported that July output among members of the Organization of the Petroleum Exporting Countries hit the highest level of 2017. If correct, that goes against the view that the group is adhering to output caps agreed to with Russia. Official OPEC monthly data will be released next Tuesday.
Building on the 2% pullback seen Tuesday was the late-afternoon release from the American Petroleum Institute. It said that U.S. crude inventories rose 1.8 million barrels last week. That runs counter to another decline that's anticipated to be seen in later Wednesday's weekly government data.
Though API's estimates don't always match official readings by the Energy Information Administration, the group's numbers are closely watched.
"At $50 a barrel, the U.S. oil price needs continued good news on inventories given the ongoing potential for supply increases," said Ric Spooner at CMC Markets.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September recently traded down 0.9% at $48.74 a barrel in the Globex electronic session. October Brent crude on London's ICE Futures exchange shed 1% to $51.26.
However, some analysts say the past day's pullback might by premature because the size of any OPEC production increase matters more than the fact that output rose since more oil often gets pumped this time of year--especially by Saudi Arabia to meet peak summer power demand.
"In the near term, we expect the market to remain tolerant of the recent uptrend in OPEC" output as seasonal demand will soak it up, said Citi Futures' Tim Evans.
The 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.
Among refined products, Nymex September diesel was recently down 0.4% at $1.6348 a gallon and reformulated gasoline blendstock eased 0.4% to $1.6540, but August ICE gasoil edged up to $484 per metric ton.
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(END) Dow Jones Newswires
August 01, 2017 22:28 ET (02:28 GMT)