Oil futures fell Thursday, pulling back after topping $50 a barrel as investors weighed evidence that the world stock overhang is finally falling against rising OPEC production.
U.S. crude futures settled down 97 cents, or 1.96%, at $48.50 a barrel on the New York Mercantile Exchange, the lowest settlement level since July 25.
Brent crude, the global oil benchmark, fell 80 cents, or 1.52%, to $51.90 a barrel after hitting an 11-week high on London's ICE Futures exchange. The Brent front-month contract traded at a premium to the second-month, a market configuration known as backwardation, indicating a tightening in supplies available for immediate delivery.
Oil traded in a wide range Thursday -- the U.S. benchmark rose as high as $50.22 during the day, but sold off sharply in the final minutes of trading. Analysts and traders attributed the big swings partly to the influence of computer-algorithm based trading systems, which have become more influential in the oil market this year.
"This well take every algorithm out there that's been bullish to neutral or sell," said Donald Morton, senior vice president at Herbert J. Sims & Co. who oversees an energy trading desk. "It's not a good sign for the short term market."
Last week U.S. crude futures settled above $50 a barrel for the first time since May. But their inability to gain traction for a sustained move above that level is a sign that investors remained unconvinced that the oversupplied market will continue moving into balance, said Gene McGillian, research manager at Tradition Energy.
"It got right up to the resistance line and it seems like the market didn't attract any new buying," Mr. McGillian said.
Ric Navy, senior vice president for energy futures at RJ O'Brien & Associates LLC, said that a stock market selloff likely also weighed on oil prices Thursday.
"There's nervousness about the general economy with all the saber-rattling going on," he said.
In earlier trading, oil investors shrugged off higher production figures from the Organization of the Petroleum Exporting Countries. The group reported that its oil output rose once again in July, in the latest challenge to its efforts to work down a global supply glut by cutting production. OPEC has cut production since January, in collaboration with other producers including Russia, with the aim of shrinking global stocks to their five-year average. This follows more than three years of excess supply.
OPEC's output rose by roughly 0.5%, to 32.87 million barrels a day last month. The uptick, which was smaller than the prior month's increase, was driven by higher production in Libya, Nigeria and Saudi Arabia, according to OPEC's closely watched monthly market report.
Some market observers say that OPEC's efforts have been making a difference.
U.S. crude oil inventories fell by 6.5 million barrels, to 1.15 billion barrels, in the week ended Aug. 4, according to the Energy Information Administration. Crude stocks typically decline during the summer season, but the size of recent draws has been larger than usual, according to S&P Global Platts.
"We are seeing some stock draws and a return to backwardation, which is what OPEC was looking for, so the whole rebalancing is not done, but we are in the process, which you can see in the market structure," Olivier Jakob, head of energy consultancy Petromatrix, said.
Gasoline futures fell 1.72 cents, or 1.06%, to $1.6028 a gallon. Diesel futures were fell 2.2 cents, or 1.33% to $1.6313 a gallon.
--Biman Mukherji and Christopher Alessi contributed to this article.
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(END) Dow Jones Newswires
August 10, 2017 16:37 ET (20:37 GMT)