Oil bounces off November lows, but bloated US stockpiles pressure market

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Oil bounces off November lows, but bloated US stockpiles pressure market

Reuters - 3/23/2017 9:24:26 AM

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Oil prices on Thursday recovered from losses chalked up the session before, but the market remains under pressure as bloated U.S. crude inventories and rising output dampen OPEC-led efforts to curb global production.

Prices for front-month Brent crude futures, the international benchmark for oil, were at $50.94 per barrel at 0146 GMT, up 30 cents, or 0.59 percent, from their last close. That came after Brent briefly dipped below $50 a barrel the previous session for the first time since November.

In the United States, West Texas Intermediate (WTI) crude futures were up 33 cents at $48.38 a barrel, after testing support at $47 overnight.

Analysts said that oil had found technical support and was being pushed up as traders took new long positions after crude hit multi-month lows overnight.

"Brent oil may climb to $51.54 per barrel, as it has cleared ... resistance at $50.84," Wang Tao, Reuters technical commodity analyst said.

Despite the bounce on Thursday, traders said the market remained under pressure, largely due to a bloated U.S. inventory and doubts that an effort led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output were having the desired effect of reining in a global fuel supply overhang.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said OPEC was "underwriting the investment plans and returns of their competition in U.S. shale oil".

McKenna said there was a risk of oil prices dropping further due to U.S. output and a lack of compliance by some producers who said they would cut production.

The Energy Information Administration (EIA) said U.S. inventories climbed almost 5 million barrels to a record 533.1 million last week, far outpacing forecasts of a 2.8 million-barrel build.

The high inventories come as U.S. oil production has risen over 8 percent since mid-2016 to more than 9.13 million barrels per day (bpd) to levels comparable in late 2014, when the oil market slump started.

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