US crude was up 90 cents at $45.65.
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US crude for August delivery settled down $2.05, or 4.4%, to $44.75 a barrel on the New York Mercantile Exchange, the lowest settlement since May 10.
And the markets were gaining with crude Thursday as the Dow Jones Industrial Average was up 0.68% at 1 EDT, the S&P 500 climbed 0.45% and the Nasdaq rose 0.51%.
Middle East production has climbed to a record while US output slumps, a sign that OPEC’s strategy of defending market share is succeeding, the International Energy Agency said.
This view was backed by the release of the latest inventory data from the US Government’s Energy Information Administration that reported gasoline supplies rising 1.2 million barrels for the week compared to market forecast for a 1 million barrel decline. The IEA says that the market contango does not support floating storage today – the price differential between near-term contracts, while trading at a discount to futures one year out, is not wide enough to justify storing oil at sea.
US crude traded at $46.20 a barrel, down 60 cents on Tuesday’s close.
On the supply side, after a steep drop by 0.9 million bpd in non-OPEC production in 2016 to 56.5 million bpd, output is expected to recover modestly by 0.2 million bpd in 2017.
“The stockpile data is driving the market”, said Chip Hodge, who oversees a $12 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston.
Venezuela has said it hopes to keep output steady this year but the IEA said a drop of around 200,000 barrels per day looked “unavoidable” as global oil companies face repayment issues and daily operational challenges. The global benchmark crude traded at an 85-cent premium to WTI for September delivery.
Iran continued its rapid return to the market since trade sanctions were lifted, with production up by 750,000 b/d since the start of the year, while conditions in strife-torn and cash-strapped Venezuela continue to deteriorate with production falling another 240,000 barrels a day in June.
Nationwide supplies fell 2.55 million barrels to 521.8 million last week, EIA data show. “I expect that we’re going to maintain high inventory levels throughout the summer, going into Labor Day”. Analysts had expected a three million barrel decline, according to a Bloomberg News survey.
Concern about the economic impact of Brexit has weighed on oil prices, which at 47 a barrel have fallen from a 2016 high close to 53 in early June.
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Distillate stockpiles, which include diesel and heating oil, rose 4.1 million barrels, versus expectations of a 256,000-barrel increase, the EIA data showed.
