Oil falls on high OPEC supplies despite lower U.S. crude stocks
London. Oil prices slipped on Thursday as a rally that had pushed up prices by almost 10 percent since early last week lost momentum despite renewed signs of a gradually tightening U.S. market. Brent crude was down 45 cents at $51.91 a barrel by 0745 GMT. U.S. light crude was 45 cents lower at $49.14.
Strong demand in the United States has been supporting prices, while high supplies from OPEC producers were restricting further gains, traders said, pointing to a range-bound market. "Both contracts appear to be moving into a range consolidation mode," said Jeffrey Halley of futures brokerage OANDA.
U.S. crude has held below $50 despite record gasoline demand of 9.84 million barrels per day (bpd) last week and a fall in commercial crude inventories in the week to July 28 of 1.5 million barrels to 481.9 million barrels, according to the U.S. Energy Information Administration (EIA). That's below levels seen this time last year, indicating a tightening U.S. market. Traders say high production by the Organization of the Petroleum Exporting Countries is capping prices.
OPEC and other producers including Russia have promised to restrict output by 1.8 million bpd until March 2018 to help support prices and draw down inventories. But Thomson Reuters Eikon data show crude oil shipments by OPEC and Russia, which excludes pipeline supplies, hit a 2017 high of around 32 million bpd in July, up from around 30.5 million bpd in January. Analysts say the oil industry has now adapted to an era of low prices and can produce and operate at levels that would previously have been uneconomic, reported Reuters. "Of the major projects sanctioned by the big five oil companies (ExxonMobil, Royal Dutch Shell, Chevron, BP and Total) over H1 2017, there has been a clear breakeven target price of $40 per barrel or lower at offshore oil projects," BMI Research said.
U.S. investment bank Goldman Sachs said this week that the oil industry had successfully adapted to oil prices around $50 per barrel.