Oil futures extended Tuesday's decline in early Asian trading Wednesday amid a broader risk-off move in markets as tensions between the U.S. and North Korea build anew.
Meanwhile, crude is also facing concerns that global supplies aren't falling as much as hoped.
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A major worry is US crude inventories, which have steadily dropped from record highs the past few months, could be about to start rising again with the summer driving season coming to an end, said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.
While the American Petroleum Institute industry group late Tuesday said U.S. commercial crude supplies fell 7.8 million barrels last week by its count, gasoline stockpiles rose. If confirmed by the official Energy Information Administration data released later Wednesday, it would mean a 6th-straight weekly drop in U.S. oil inventories.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September was recently down 0.4% at $48.97 a barrel in the Globex electronic session. October Brent crude on London's ICE Futures eased 0.5% to $51.87.
Refined products were seeing bigger declines. Nymex September diesel was recently down 0.8% at $1.6169 a gallon, reformulated gasoline blendstock slid 1.2% to $1.6007 and August ICE gasoil was off 1% at $478.50 per metric ton.
Beyond the API data, also weighing on the market is broader selling in risk assets as the U.S. and North Korea have ratcheted up their war of words in recent hours--pressuring assets like stock but boosting gold prices.
That adds to pressure from this year's faster-than-expected acceleration in U.S. oil production--which has been a challenge for the Organization of the Petroleum Exporting Countries. Together with a handful of non-cartel producers, the non-US suppliers have been sidelining some output since January, with mixed effect.
OPEC this week reiterated the pact will remain in force until March while some who haven't fully complied to their production caps as yet reiterated their support and commitment to the 24-nation accord. But the question remains whether OPEC's cuts are helping U.S. shale producers. Some market watchers say given the increasing efficiency among those players, price advantages caused by the output caps have emboldened U.S. producers to boost production.
Meanwhile, Tuesday reports "suggesting Saudi Arabia was supplying lower volumes of crude than requested to its Asian customers did little to appease these concerns," said ANZ Research.
But the EIA has also noted that the increase in active oil rigs last month was the lease since the government started its own count in June 2016. Furthermore, some U.S. exploration and production companies recently announced less investment spending for the rest of 2017, "suggesting the current rate of U.S. oil production growth could slow," the agency added.
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(END) Dow Jones Newswires
August 08, 2017 22:13 ET (02:13 GMT)