Oil dropped towards $69 a barrel pressured by a reported rise in U.S. fuel stocks and expectations that OPEC-led efforts to boost prices by cutting output will increase supply from the United States and other rivals.
Brent crude, the global benchmark, slipped 35 cents to $69.03 by 1418 GMT on Thursday, January 18, . On Monday it touched $70.37, the highest since December 2014. U.S. crude was down 18 cents at $63.79, having hit its highest since December 2014 on Tuesday.
Crude is still within sight of its highest since December 2014, supported by supply cuts led by the Organization of the Petroleum Exporting Countries and concern that unrest in producer nations such as Nigeria could further curb output.
But a weekly supply report from the American Petroleum Institute (API) on Wednesday said inventories of gasoline and diesel had risen. OPEC’s monthly report on Thursday raised its forecast for oil supply from non-members in 2018.
“Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil,” OPEC said in the report, using another term for shale.
U.S. government supply data at 1600 GMT will be in focus as traders look for confirmation of the API report.
Brent has risen from $61 a barrel in early December and some analysts say the rally may be about to run out of steam.
“The upside is now limited for oil prices,” said Fawad Razaqzada, market analyst at brokerage Forex.com. “U.S. oil producers will ramp up production in the coming months.”
OPEC’s report follows a forecast from the U.S. Energy Information Administration (EIA) on Tuesday that it expects U.S. oil output to continue to rise in February with production from shale increasing by 111,000 barrels per day (bpd).
The agency previously said U.S. output could reach 10 million bpd in February and 11 million bpd in 2019, Reuters reports.
Even so, traders said prices were unlikely to fall far due to the OPEC-led curbs and the risk of further disruptions.
Militant group Niger Delta Avengers threatened to attack Nigeria’s oil sector in the next few days, potentially hampering supplies in Africa’s largest exporter.
“The impact of such a threat, if carried out, would be significant on the global supply and demand balance,” said Tamas Varga of oil broker PVM. “The market is still sensitive to geopolitical developments.”