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Benchmark Brent crude was down 60 cents at $51.22 a barrel by
0915 GMT, almost 10 percent below this month's peak. U.S. light
crude was down 55 cents at $49.07.
Traders reported ample supplies in all key markets despite
efforts led by the Organization of the Petroleum Exporting
Countries (OPEC) and Russia to cut output by 1.8 million barrels
per day (bpd) in the first half of the year to tighten the
market and prop up prices.
OPEC is discussing extending its cuts into the second half of
the year, but the group has an uphill task as oil inventories
are near record levels in many parts of the world.
"It is clear that the world has plenty of oil in stock, making
OPEC's life that much harder," said Jeffrey Halley, senior
market analyst at futures brokerage OANDA in Singapore.
U.S. data on Wednesday showed a drop in crude oil stocks, but
gasoline inventories surged as refiners produced more fuel than
the market could consume.
"U.S. commercial stocks increased by more than 6.5 million
barrels last week," said Tamas Varga, senior analyst at London
brokerage PVM Oil Associates. "Stock rebalancing has been put on
hold as U.S. commercial oil inventories have jumped."
U.S. crude oil production is also rising, up 10 percent since
mid-2016 at 9.27 million bpd.
Rystad Energy expects U.S. shale oil output to grow by 100,000
bpd each month for the rest of this year and into 2018 if oil
prices hold around $50-$55 a barrel, well above estimates by the
U.S. Energy Information Administration for monthly gains of
about 29,000 bpd in 2017 and 57,000 bpd in 2018.
"We see a risk for a weaker oil price towards the end of the
year ... because shale is delivering so much oil," Jarand Rystad
told Reuters.
Still, with an expectation that OPEC will extend its production
cuts to cover all of 2017, analysts said there was support for
prices around current levels.
"Brent oil looks neutral in a range of $51.30 to $52.32," said
Reuters technical commodities analyst Wang Tao.
(Additional reporting by Henning Gloystein in Singapore; Editing
by David Goodman)
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