Oil prices fell to the lowest in a week on Wednesday on a strong dollar and expectations that U.S. producers would boost output, while OPEC signaled a drop in the global oil supply surplus this year as the group’s output fell from a record high.
U.S. shale production is set to snap a three-month decline in February, the U.S. Energy Information Administration said on Tuesday, as energy firms boost drilling activity.
Brent crude was down $1.29 or 2.33 percent at $54.18 a barrel by 2:06 p.m. EST (1906 GMT), while U.S. crude was down by $1.18 or 2.25 percent at $51.3 a barrel. Both contracts had earlier in the session hit their lowest levels since Jan. 11.
EIA projected oil production in the biggest U.S. shale fields would rise by 40,750 barrels per day (bpd) to 4.748 million bpd in February.
“The petroleum markets have turned lower again in Wednesday trade amid talk that higher oil prices will translate into additional U.S. shale-oil production as a counter-balance to OPEC efforts to trim supply and reduce excess inventories,” Tim Evans, Citi Futures’ energy futures specialist, said in a note.
The Organization of the Petroleum Exporting Countries (OPEC) signaled a falling oil supply surplus in 2017 on Wednesday as the exporter group’s output slips from a record high ahead of a deal to cut supply and outside producers show positive initial signs of complying with the accord.
However, OPEC, in a monthly report, also pointed to the possibly of a rebound in U.S. output, as higher oil prices following supply cuts by other producers support increased shale drilling.
“OPEC’s regular dose of bullish rhetoric intending to prop up values has begun to wear thin,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
OPEC excluding Indonesia, pumped 33.085 million bpd last month, according to figures OPEC collects from secondary sources, down 221,000 bpd from November, OPEC said in a monthly report on Wednesday. The figures showed the biggest reduction came from Saudi Arabia.
OPEC, Russia and other non-OPEC producers in November and December pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.
Analysts forecast that U.S. crude stocks decreased by about 300,000 barrels in the week to Jan. 13. The American Petroleum Institute (API) will release its inventory report on Wednesday at 4:30 p.m. EST. Weekly inventory data from the EIA will be released on Thursday at 11 a.m. EST (1600 GMT), both delayed a day because of the federal holiday on Monday.