Oil prices edged down on Thursday amid mixed U.S. inventory data and increasing concerns that a supply action by major producers may not be sufficient to clear a global surplus.
Brent crude, the global oil benchmark, fell 0.95% to $51.33 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.93% at $49.16 a barrel.
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Prices rose overnight on data from the Energy Information Administration showing that U.S. crude inventories fell 3.6 million barrels last week.
But the positive market sentiment reversed on concerns of an oversupply in petroleum products.
Gasoline stockpiles grew by 3.4 million barrels last week. Diesel stockpiles also increased unexpectedly, rising by 2.7 million barrels, as consumer demand failed to absorb a steady stream of petroleum products pumped out by refineries working at almost top efficiency levels.
Refinery utilization was 94.1%, the highest level for this time of year since April 2001.
Inventories rose because of two weeks of high imports, which reached a six-month high of 916 thousand barrels a day, noted Standard Chartered in a recent report.
"There is a deeply bearish market sentiment that is going to pick up on rising gasoline stockpiles despite crude inventories falling," said Paul Horsnell, the head of commodity research at Standard Chartered. "There is impatience that OPEC can't clear the surplus."
Last year the Organization of the Petroleum Exporting Countries and external producers such as Russia s igned a deal to curtail global production by about 1.8 million barrels a day.
The deal helped bolster crude prices but most analysts say the oil cartel needs to extend the agreement to make a dent in global stocks. OPEC is scheduled to decide on whether to extend the deal at its meeting on May 25 in Vienna.
Russia may yet throw a wrench in that process. The country's energy minister, Alexander Novak, is reported to have said a decision to prolong the deal was still "under discussion," spooking investors.
"There is no obviously bullish factor in the market. I don't see any big change," said Li Li, energy research director at ICIS China. "I think the market will be focusing on the OPEC meeting next month."
Over the next month or so, oil prices are likely to continue to trade near $50 per barrel even if the cap is extended, said Li Li.
Low oil prices haven't only impacted margins, but also hurt oil exploration. Global oil discoveries fell to a record low last year as companies cut spending, and oil projects sanctioned were at the lowest level in more than 70 years, the International Energy Agency said, warning that the trend would likely continue this year.
Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels a year over the past 15 years, while the volume of conventional resources sanctioned for development last year fell by 30% to 4.7 billion barrels last year.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 1.80% to $1.57 a gallon. ICE gasoil changed hands at $460.25 a metric ton, down $7.00 from the previous settlement.
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(END) Dow Jones Newswires
April 27, 2017 07:34 ET (11:34 GMT)