United States crude oil inventories are still above historic norms — CHART

Crude oil prices dropped below $50 per barrel after the Organization of Petroleum Exporting Countries (OPEC) took the path of least resistance in the bid to end the supply glut in oil.

Brent crude was trading at US$49.27 per barrel at 0424 GMT, down 20 cents, or 0.4 per cent from its last close.

USA crude oil prices recovered to trade roughly flat on Thursday, after falling to levels that put the commodity on track for its lowest close in more than six months.

The EIA, instead of reporting what was expected to be the ninth straight drop in us crude oil inventory, reported a 3.3-million-barrel increase in supply.

"There is some general doubt regarding the success of OPEC", said Olivier Jakob at Switzerland-based consultancy Petromatrix.

First of all, the latest development in the Middle East is actually a diplomatic incident, which is unlikely to lead to any military action under normal circumstances, indicating no disruption to the regional oil production and supply.

"The relentless increase in U.S. oil production appears to have the market anxious that the Opec cuts will be completely nullified by the increased USA production", said William O'Loughlin, analyst at Australia's Rivkin Securities.

Oil prices across the globe were on the rise on Monday - a direct impact of the tensions in the Middle East - and an effect of the production cut by OPEC.

The US Energy Information Administration (EIA) reported that US crude stockpiles rose by 3.3 million barrels last week, surprising traders who had been expecting a further draw of 3.2 million barrels. That time, OPEC agreed to slash the output by 1.2 million barrels per day from January 1, while non-OPEC oil producers agreed to reduce output by 558,000 barrels per day starting from January 1 for six months.

World fuel production and consumption is roughly in balance, at nearly 98 million bpd, although inventories remain bloated, the U.S. Energy Information Administration (EIA) said on Tuesday.

USA crude imports rose last week by 1.1 million bbl/d.

If buyers regroup and WTI crude returns to $47.14 to $48.07 then this will indicate that the EIA news was a one-time event after 9 weeks of drawdowns.

Crude futures came under additional pressure on Thursday from signs of rising output in Libya and Nigeria, two OPEC members exempt from production cuts.

A weekly report from the Energy Information Administration on Wednesday showed USA crude, gasoline and distillates stocks swelled in the week ended May 26.

  • Zachary Reyes