Oil prices are on pace for their biggest daily percentage decline since early March, and USA crude oil production is expected to rise in both 2017 and 2018.
WTI oil prices fell by 3.8% on Nymex Wednesday (http://www.marketwatch.com/story/oil-steadies-as-investors-await-eia-inventory-report-2017-04-19), marking the steepest drop since March 8. However, that level was still near a record high.
Last week the prices of oil had gone past $53 a barrel following the push by some producers to extend the OPEC supply cut deal by the more than 6 months that had been settled on.
Oil fell to a two-week low on Wednesday, after a surprising build in US gasoline inventories and a rise in domestic crude output that is partially offsetting cutbacks by other countries trying to reduce a global glut.
Crude futures were trading more than 30 cents higher in Asia early Thursday, but the recovery, against a rout of almost $2/barrel at the previous day's close, was more likely bargain-hunting than the start of a full correction, as the weekly counter-seasonal build in USA gasoline inventories continued to weigh on market sentiment.
The continued growth in US production and the rise in stockpiles forced the market to respond bearishly based on the increased inventory outlook.
At an energy conference in Abu Dhabi, Saudi Arabia's energy minister Khalid al-Falih hinted at the extensive behind-the-scenes negotiations among big oil producers ahead of the group's meetings scheduled for May.
"The market sentiment appears to be that the increase in USA shale production outweighs the OPEC action and the market is keeping the loss we had yesterday", he said.
Traders said that the slight gains came on the back of a reduction in commercial U.S. crude stocks, which fell by 1 million barrels last week to 532.34 million barrels, according to the U.S. Energy Information Administration (EIA).
"Rising U.S. production levels are offsetting more than a third of the six-month agreement of the 1.8 million barrel-per-day cut", McGillian said.
Slight production reported Wednesday also reinforced widespread anxiety that US shale producers are becoming more capable in churning out oil at a lower price, analysts say.
"A build to gasoline inventories is tilted a little bearish, although a build of 2.5 million barrels on the Gulf Coast was in response to higher refining activity", said Matt Smith, director of commodity research at ClipperData.
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