Oil prices were sitting just below 8-week highs on Thursday, buoyed by hopes that a steeper-than-expected decline in US crude oil inventories will reduce global oversupply.
Brent crude futures were down 16 cents or 0.3 per cent at $50.81 a barrel at 0536 GMT, after rising about 1.5 per cent in the previous session. US West Texas Intermediate futures were down 13 cents or 0.3 per cent at $48.62 a barrel.
US crude stocks fell sharply last week as refineries increased output and imports declined, while gasoline stocks decreased and distillate inventories dropped, the Energy Information Administration had said on Wednesday.
The 7.2 million barrel decline in crude inventories in the week ending July 21 was well above the 2.6 million barrel forecast.
“This marks the fourth consecutive week that total hydrocarbon inventories have fallen during a time of year when they normally increase,” said PIRA Energy oil analyst Jenna Delaney.
Plan to cut spending
US shale producers, including Hess Corp, Anadarko Petroleum and Whiting Petroleum, this week announced plans to cut spending this year as a result of low oil prices.
Optimism that the long-oversupplied market is moving towards balance was also supported by news earlier in the week that Saudi Arabia plans to limit its crude exports to 6.6 million barrels per day (bpd) in August, about 1 million bpd below its export levels a year earlier.
Fellow members of the Organisation of Petroleum Exporting Countries (OPEC) Kuwait and UAE have also promised export cuts.
“The narrowing of the global glut is still on track,” OCBC said.
But analysts say oil prices may have little room to head higher as recent gains could encourage more output, particularly from US shale producers with low costs.
“The market will likely be paying even more attention to drilling activity in the U.S. in the coming weeks, particularly after suggestions from certain industry players that the rig count in the U.S. is slowing,” ING said in a research note on Wednesday.
US fuel exports
US fuel exports are on track to hit another record in 2017, making foreign fuel markets increasingly important for the future growth prospects and profit margins of US refiners.
Meanwhile, Norway's Statoil said on Thursday it expected a 5 per cent increase in output this year amid higher oil prices, but the company reduced its planned exploration spending.