Oil prices could be set for another weak day of trading after higher US output figures appeared to outweigh positive sentiment related to falling US stockpiles.
Brent crude futures moved in and out of negative territory this morning following a 0.8% decline yesterday, a sell-off that was sparked by higher US production.
US output surge
Data from the US Energy Information Administration (EIA) showed weekly domestic output had jumped to its highest level in more than two years.
US production reached just over 9.5 million barrels a day last week, an increase of around 100,000 barrels per day on the prior week and the strongest level since the middle of 2015.
Rising US oil output has been a major bearish factor for the market this year. Last month, energy consultancy firm Pira Energy predicted the trend would continue, with the US on course to become one of the world´s largest exporters.
Improvement in technology means US producers in areas such as the Texas Permian Basin can now break even at lower oil prices (below the $40 per barrel mark) through advanced fracking techniques.
Falling US stockpiles
On the plus side, EIA data also showed that US crude inventories had fallen by more than expected over the week, 9 million barrels lower versus expectations for a 3 million-barrel drawdown. It marked the seventh weekly decline in US stockpiles.
While the continued fall in US inventories indicates that OPEC agreements are having an impact on reining in global production, the recent price action shows that the market continues to take a bearish stance on oil´s longer-term prospects.
Brent crude futures are currently trading at around $50 per barrel versus around $56 at the beginning of the year.