Oil prices ended lower onWednesday as government data showed USA crude stockpiles gainedmore than expected last week.
The price action early in the session on Thursday indicates that crude oil traders may have seen enough of this current break and have chose to book profits well ahead of the November 14, 2016 bottom at $45.78, which many believe to be the next major downside target. However, by the end of the session, prices rebounded enough to erase most of the loss. The Organization of Petroleum Exporting Countries and 11 other nations began trimming supply for six months starting January 1 in an effort to ease a global supply glut. While OPEC won't formally decide until May whether to prolong production cuts, officials will meet this weekend in Kuwait to discuss their deal's progress. Saudi Energy Minister Khalid Al-Falih has said the group would extend the deal if oil stockpiles remain high.
Chip Hodge, who oversees a $12 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said: "This has got to hurt Middle East producers a lot".
City analysts say the market is fast losing patience, as Opec cuts instituted on 30 November 2016 have not had as significant an impact on global inventories, non-Opec compliance with the cuts remains questionable, but relatively higher prices have ended up propping United States production.
Brent for May settlement gained as much as 46 cents, or 0.9 percent, to $51.10 a barrel on the London-based ICE Futures Europe exchange. Total volume traded was about 40% below the 100-day average.
Global benchmark Brent futures for May delivery were down 59 cents, or 1.1 per cent, at $50.37 a barrel by 9:48 a.m. ET.
The U.S. Energy Information Administration (EIA) said onWednesday that the country's crude inventories climbed by nearly 5million barrels to 533.1 million last week, far outpacing forecastsfor an increase of 2.8 million.
Saudi Arabia ranked the world's No. 1 oil producer in November, pumping oil at a rate of 10.6 million barrels per day compared to Russia's 10.4 million.
Crude oil prices drifted lower in early Thursday trading as investors remained cautious about US economic trajectory ahead of a pivotal vote on health insurance.
"The market remains nervous about rising US production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries", said Abhishek Kumar, senior energy analyst at Interfax Energy in London.