Oil prices fell 1 per cent on Wednesday after data showed an increase in United States crude inventories, stoking concerns that markets remain oversupplied despite efforts by top producers Saudi Arabia and Russian Federation to extend output cuts.
US crude stockpiles likely rose by 882,000 barrels in the week ended May 12, according to industry group American Petroleum Institute. Forecasters had expected another draw in U.S. crude stocks.
The U.S. Energy Information Administration report on oil inventories is due Wednesday at 10:30 a.m. EDT.
Goldman said that beyond the ongoing rise in USA oil production, which is up over 10 percent since mid-2016 to 9.3 million bpd, output will increase by OPEC members who were exempt from the cuts, or where supply disruptions had ended, including Libya and Nigeria. The Wall Street Journal's survey of 13 analysts, however, estimates a decrease of 2.2 million barrels.
Brent crude was down 20 cents, or 0.4 per cent, from the last close at US$51.45 per barrel at 0647 GMT. Earlier, Brent had settled down 17 cents at US$51.65 a barrel.
USA crude oil inventories rose by 882,000 barrels to 523. Both benchmarks have risen more than $5 since hitting five-month lows 10 days ago. Members of the Organization of the Petroleum Exporting Countries have stated their intentions to keep supply cuts going through next year.
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"The agreement by OPEC to extend cuts into 2018 is critical", said AB Bernstein in a note.
Prices are up by 2 percent since the announcement of the planned extension on Monday, compared with an over 15 percent jump in the two days following the announcement of the initial cut on November 30, 2016. "If you do get prices in the mid-to-upper US$50s all that's going to do is encourage a lot of production in the U.S.", said Nauman Barakat, head of the energy desk at ADM Investor Services in NY.
Kuwait's oil minister Essam al-Marzouq said on Tuesday that his country supported the Saudi/Russian initiative.
The International Energy Agency said yesterday that commercial oil inventories in industrialised countries rose by 24.1 million barrels in the first quarter of 2016, despite the cuts.
Even if the OPEC cuts are extended to the remainder of the year, "stocks at the end of 2017 might not have fallen to the five-year average, suggesting that much work remains to be done in the second half of 2017 to drain them further", said the IEA.
Investors are being pulled between news that Organization of the Petroleum Exporting Countries producers and non-cartel suppliers are poised to cut more of their production on the one hand, and expectations of accelerating oil output from the USA on the other.
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