Oil prices dipped on Thursday, struggling to recover from four-month lows because of investor concerns that OPEC-led supply cuts were not yet reducing record US crude inventories. Benchmark Brent crude oil was trading at $50.57 a barrel by 11:49 a.m. EDT (1549 GMT), down 7 cents on the day and holding above Wednesday's slide to $49.71, its lowest level since Nov. 30 when OPEC announced plans to cut output. US light crude slipped 27 cents to $47.77.
Brent remains well below this year's high above $58, reached shortly after Jan. 1 when the deal between the Organization of the Petroleum Exporting Countries and non-OPEC states to curb supplies by 1.8 million barrels per day (bpd) came into effect. OPEC has broadly met its commitments to reduce output, but non-OPEC producers have yet to fully deliver on pledged cuts and US shale oil producers have been pumping more oil after crude prices recovered from last year's drop below $30. "OPEC is going to do their best to jawbone this market higher, but it seems the market is going to do its best to reject that," said Oliver Sloup, director of managed futures at IITrader.com. "We think there won't be as much follow-through from OPEC as there has been in the past."
The market may come under further pressure as US rig counts continue to rise, indicating production growth is outpacing demand, he said. "Headwinds from rising production and compliance issues will keep the upside limited for now," said Ole Hansen, head of commodity strategy at Saxo Bank, adding that risks were "skewed to the downside" and the upside for Brent was limited to $53. Oil ministers from OPEC and some non-OPEC states meet on Sunday in Kuwait, where they are expected to discuss compliance. Global stockpiles have risen even with OPEC-led cuts. On Wednesday, data from the US Energy Information Administration showed US inventories jumped by a bigger-than-expected 5 million barrels last week to 533.1 million.
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