Oil steady after big drop in US fuel stocks, but markets remain bloated

SINGAPORE: Oil prices held steady on Thursday, hanging on to gains made the previous session when falling US crude stocks lifted the market, as analysts offered mixed supply outlooks for the commodity ahead of a key OPEC meeting next week.

Crude oil prices are still capped below the key $50-per-barrel mark on concerns about high supplies from the Organization of the Petroleum Exporting Countries (OPEC) despite its pledge to cut output along with non-OPEC producers.

Brent crude futures, the international benchmark for oil prices, were at $49.66 per barrel at 0512 GMT, just 2 cents down from their last settlement.

US West Texas Intermediate (WTI) crude futures were at $47.10 per barrel, 2 cents below their last close.

Prices jumped more than 1.5 percent in the previous sessions for both crudes on a report showing US crude and fuel stocks fell in the United States last week.

"Both contracts now face some significant technical resistance ahead, which may give traders some pause for thought after crude's impressive one-week rally," said Jeffrey Halley of futures brokerage OANDA.

US crude inventories fell by 4.7 million barrels in the week to July 14, according to data from the Energy Information Administration, against analyst expectations for a decrease of 3.2 million barrels.

"Over the past 15 weeks, US oil inventories have fallen ... 13 times, and in most cases, the falls were more pronounced than expected," said Fawad Razaqzada, market analyst at futures brokerage Forex.com.

"Yet, US crude oil inventories still remain near the upper half of the average for this time of the year," he added.

The ongoing high US inventories - crude stocks are now just over 490 million barrels - as well as high output from OPEC are preventing prices from rising much further, traders said.

OPEC and non-OPEC producers are due to meet in St. Petersburg, Russia, next Monday to discuss the current situation in oil markets. OPEC, along with Russia and other non-member producers, has pledged to cut production by 1.8 million barrels per day (bpd) between January this year and March 2018.

A lack of compliance by some, though, and exemptions for Nigeria and Libya have undermined that OPEC-led effort, preventing prices from rising by much.

Analysts, however, pointed to rising political risk factors, including potential US sanctions on Venezuela and tensions in the Middle East and North Africa, that could impact oil prices.

"We don't expect to see this quietness to last forever, as geopolitical risks are rising again," ANZ bank said in a note.