Oil futures came under pressure Wednesday on fears that rising U.S. oil stocks and shale output are undercutting efforts by major producers to rein in global supply.
Brent crude, the global oil benchmark, fell 0.17% to $52.02 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were down 0.14% at $49.49 a barrel.
The American Petroleum Institute cast a cloud over the market after the industry group released data showing U.S. crude inventories rose 900,000 barrels last week while gasoline supplies jumped by 4.4 million barrels. Official data is due from the U.S. Department of Energy later on Wednesday.
The API data is alarming because this is the time of year stockpiles usually fall as refiners process more crude to make gasoline and diesel ahead of the U.S. summer driving season.
"Right now the market sentiment seems to be changing and becoming more negative," said Eugen Weinberg, an analyst at Commerzbank. "I would not be surprised to see prices come under considerable pressure today should the data from the API be confirmed by the DOE."
U.S. production has been rising weekly for more than two months, and if the upswing persists it may thwart efforts by the Organization of the Petroleum Exporting Countries and other producers such as Russia to reduce global inventories to five-year averages, analysts say.
Investors are also unsure about whether OPEC will decide to extend its production cut at its next meeting on May 25 in Vienna. The uncertainty helped pull down oil prices 7% last week.
Russia's noncommittal stance is another sore spot. So far, Moscow hasn't signaled support for an extension to the output cuts. Without Russia's participation, smaller producers may not be so willing to stick to their parts of the deal.
Russia is the world's biggest oil producer and agreed to cut 300,000 barrels a day of output by the end of this month.
If Russia backs away, that would shake up market psychology. But some say it may not necessarily derail OPEC's effort because it could prompt other participants to cut more to prevent prices from slumping.
"Our base scenario assumes ongoing Russian cooperation, although we do consider it somewhat less likely than the OPEC extension," said Timothy Evans, a Citi Futures analyst.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.79% to $1.61 a gallon. ICE gasoil changed hands at $466.75 a metric ton, up $3.00 from the previous settlement.
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