Oil prices edged lower in European trading on Thursday, as data showing U.S crude stockpiles shrank by less than anticipated, while gasoline inventories increased, underlined fears over a global supply glut.
Oil has extended its slump below US$50 (RM213) a barrel as concerns grow that rising United States supplies will offset the production curbs by the Organisation of Petroleum Exporting Countries and allies including Russian Federation. But adherence to the cuts is under scrutiny and the producer group said this week its output rose by 336,000 bpd in May to 32.14 million bpd.
The continuous rise in the U.S. production further negated the impact of restriction in oil production. The Energy Information Administration, part of the USA government, expects output from the country's major shale formations to reach 5.48m barrels a day in July, its highest-ever level. Stockpiles of oil worldwide are large and growing, an indicator of persistent oversupply, according to data from the International Energy Agency (IEA) cited by the Wall Street Journal. "In contrast, OPEC production recorded another year of solid growth (1.2 Mb/d), with Iran (0.7 Mb/d), Iraq (0.4 Mb/d) and Saudi Arabia (0.4 Mb/d) more than accounting for the increase".
It seems that oil inventories are particularly unpredictable as of late, with last week, the API and EIA reporting remarkably disparate figures in the amount of crude oil inventory movement-a 7.9-million-barrel discrepancy between the two that fanned the flames of an already shaky market. The IEA said stocks were 292 million barrels above the five-year average.
Brent crude futures were at $47.01 per barrel at 0222 GMT, virtually steady after slumping almost 4 per cent in the previous session. Of this, the US will contribute a daily rise of 430,000 bpd "and the year will end with production there 920 kb/d higher than at the end of 2016".
USA production is up 10 percent over the past year to 9.33 million bpd, close to top producers Russian Federation and Saudi Arabia.
Dollar trends will continue to be monitored closely in the short term with oil prices still struggling to make any sustained headway while over-supply concerns persist.
The price of oil has fallen 12 per cent since May 25, when Opec and its partners agreed to extend their supply cut, as inventories around the world have been slow to drain. The IEA cut its forecast for the supply-demand deficit in the second half of this year from 700,000 bpd to 500,000 bpd.