Oil prices dipped on Thursday on the back of rising US crude inventories and plentiful supplies, despite emerging output cuts from OPEC and other producers.
US West Texas Intermediate (WTI) crude oil futures were trading at $52.18 a barrel at 0141 GMT, down 7 cents from their last settlement.
Prices for Brent crude futures, the international benchmark for oil prices, were at $55.06 a barrel, down 4 cents.
Traders said that a crude oil inventory report published by the US Energy Information Administration late on Wednesday implied ongoing oversupply as inventories unexpectedly rose 4.1 million barrels to 483.11 million barrel.
However, record US refinery runs of 17.1 million barrels per day (bpd), up 418,000 bpd on the week, indicated strong demand, preventing bigger price falls.
“EIA data showed US refineries increased the amount of crude they processed, pushing the utilisation rate to the highest since September. This saw inventories rise ... much morethan the market expected,” ANZ bank said.
Outside the United States, emerging detail of Saudi supply cuts as parts of efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia to curb the global supply glut started to emerge.
Despite some February supply reductions to China, India and Malaysia, top crude exporter Saudi Arabia is likely to focus its cuts on Europe and the United States, shielding its biggest customers in Asia.
BMI Research said that overall “compliance to the OPEC/non-OPEC oil production cut appears to be positive... (andthat) we calculate compliance with production cuts at around 73per cent.”
The research firm said that compliance with the planned cuts was particularly strong among members of the Gulf Cooperation Council of Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.
Analysts noted that one aspect of the coordinated production cut which has been overlooked is that under the deal, producers have committed themselves to reducing output, not necessarily exports.
“The GCC countries (and Iraq) that have reportedly enacted the bulk of the production cuts are currently in the lowest domestic demand period of the year and have significant flexibility to reduce production but maintain exports,” BMIsaid.
In another indicator that there is still plentiful supply available despite the cuts, traders are ceasing the opportunity of higher crude prices following OPEC’s decision to cut output to send record volumes of 22 million barrels of surplus European and Azerbaijani oil to Asia.