Oil prices dipped on Wednesday as rising crude stocks in the United States underscored an ongoing global fuel supply overhang despite an OPEC-led effort to cut output.
Prices for front-month Brent crude futures, the international benchmark for oil, were at $50.79 per barrel at 0451 GMT, down 17 cents, or 0.3 per cent, from their last close.
US West Texas Intermediate (WTI) crude futures were down 18 cents, or 0.4 per cent, at $48.08 a barrel.
“Crude oil prices fell as concerns over rising US inventories resurfaced,” ANZ bank said on Wednesday.
US crude oil inventories climbed 4.5 million barrels in the week to March 17 to 533.6 million barrels, the American Petroleum Institute (API) had said late on Tuesday.
“The American Petroleum Institutes' crude inventories stuck the knife into crude overnight, coming in at a 4.5 million barrel increase against an expected increase of 2.8 million barrels,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“If the API stuck the knife in, tonight's EIA Crude Inventory figures may twist it. A blowout above the 2.1 million barrel increase expected, may well torpedo oil below the waterline,” he added.
Official US Energy Information Administration (EIA) oil storage data is due on Wednesday.
US oil production
The bloated storage comes as US oil production has risen over 8 per cent since mid-2016 to more than 9.1 million barrels per day (bpd), levels comparable to late 2014, when the oil market slump started.
Rising production in the United States and elsewhere, and bloated inventories, are undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output and prop up prices.
“OPEC's market intervention has not yet resulted in significant visible inventory draw-downs, and the financial markets have lost patience,” U.S. bank Jefferies said on Wednesday in a note to clients, although it added that the cutbacks would likely start to show by the second half of the year if OPEC extends its production cuts beyond June.
Despite cuts, analysts warned of renewed or ongoing oversupply in coming years, especially as US shale producers ramp up and once OPEC returns to full capacity.
US bank Goldman Sachs warned its clients in a note this week that a US shale led production surge “could create a material oversupply in 2018-19''.