Oil prices fell by about 1 percent on Thursday on swelling U.S. supply and amid a cautious reaction to trade talks between the United States and China, the world's two largest oil consumers, that finished without concrete details to ending their dispute.
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U.S. West Texas Intermediate (WTI) crude oil futures were at $51.80 per barrel at 0432 GMT, down 56 cents, or 1.1 percent, from their last settlement.
International Brent crude futures were down 0.9 percent, or 57 cents, at $60.87 per barrel.
Both oil benchmarks rose by around 5 percent the previous day as financial markets around the world surged on the hopes that Washington and Beijing may soon be able to end their trade dispute, soothing fears of an all-out trade war between the two biggest economies and its possible impact on global growth.
By Thursday, however, the positive feelings ebbed because of a lack of a details on the talks despite a warm statement from China on the outcome, and financial markets took a breather from the rally.
Vandana Hari of consultancy Vanda Insights in Singapore said in a note that oil prices dropped "as optimism fueled by the U.S.-China trade talks earlier in the week appeared to have run its course and official statements after the conclusion of three days of negotiations, while indicating modest progress, lacked details."
Meanwhile, U.S. bank Morgan Stanley cut its 2019 oil price forecasts by more than 10 percent on Wednesday, pointing to "weakening economic growth expectations" and rising oil supply from especially from the United States as reasons for their lower price forecast.
Morgan Stanley now expects Brent to average $61 a barrel this year, down from a previous estimate of $69 a barrel, and U.S. crude to average $54 per barrel, against a prior forecast of $60.
The main source of new supply is the United States, where crude oil production remained at a record 11.7 million barrels per day (bpd) in the week ending Jan. 4, the Energy Information Administration (EIA) said on Wednesday.
That has resulted in swelling fuel inventories.
Gasoline stocks rose 8.1 million barrels, to 248.1 million barrels, marking the largest weekly rise since December 2016, the EIA said. Distillate stocks swelled by 10.6 million barrels, to 140.04 million barrels.
Although crude stocks dipped by 1.7 million barrels, to 439.74 million barrels, they remained above their five-year seasonal average of 435 million barrels.
The surge in U.S. crude production runs counter to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut supply aimed at reining an emerging glut.
"Balancing the market would require OPEC discipline to continue well into 2020," Morgan Stanley said.
(Reporting by Henning Gloystein Editing by Joseph Radford and Christian Schmollinger)