Oil prices have retreated after rising US stockpiles and elevated OPEC production hit sentiment.
Data from the American Petroleum Institute (API) showed US crude stocks surprised on the upside for the week ended July 28. US inventories rose by 1.8m barrels versus expectations for a 3m barrel slide in stock levels.
Surveys, meanwhile, suggested that OPEC production had risen over July despite the organisation´s pledge to cut output.
The readings released on Tuesday abruptly ended six days of gains for oil as traders fretted once again about the ongoing supply glut hanging over the market.
Brent crude oil futures slid 2.3% yesterday and were another 0.3% lower this morning, trading at just over $51 per barrel.
Negative sentiment could easily see Brent fall below the psychologically important $50 per barrel level later this week.
While the API data shows US crude stock levels continue to weigh on the market, investors will be closely studying the contents of the US Energy Information Administration´s (EIA) report that will be released later today.
Last week´s EIA report provided a boost to oil prices after it showed domestic US crude supplies declined by 7.2m barrels in the week ended July 21 versus market forecasts for a 2.5m barrel dip.
Along with the API data indicating US stockpiles were on the rise again, survey data from Kpler also weighed on oil prices yesterday.
According to the energy data provider, OPEC´s crude oil exports jumped by around 388,000 barrels per day last month driven by increased volumes from the likes of Nigeria, Libya and the UAE.
Taken together, the readings indicate that there is no let-up in the overall trend that has pushed oil prices down this year, namely a lack of success on the part of OPEC in bringing down production combined with increasing output from North American producers.
Rising US shale production has been particularly bearish for oil prices in 2017, though rising costs may begin to push back on the trend.
Yesterday, ING issued a research note citing higher operating costs for shale producers in the Permian Basin given rising demand for oil rigs. Daily rates for the latter had risen from around $12,000 per day at the end of 2016 to nearly $13,000 per day in May 2017, according to ING.
The investment bank´s research team believes US shale producers will also see further increases in operating costs due to rising frac sand prices and a finite supply of drilling crews and equipment.