Oil prices slip as high inventories curb recovery

Oil prices fell slightly in trading on Thursday. QEP Resources photo.

Oil prices well below this year’s highs

Oil prices fell slightly in trading on Thursday as investors remained concerned that US crude inventory supplies were not being affected by OPEC-led production cuts.

By 11:49 a.m., benchmark Brent crude oil was trading at $50.57/barrel, down 7 cents on the day, but holding above Wednesday’s drop to $49.71, the lowest since Nov. 30.

US light crude fell by 27 cents to $47.77.

While OPEC has largely met its supply cut commitments to reduce production by 1.2 million b/d, non OPEC producers who also signed onto the deal, have yet to deliver on their pledged reductions.

Also, US shale producers have increased their production as oil prices increased since their drop to below $30/barrel last year.

“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,” Oliver Sloup, director of managed futures at IITrader.com told Reuters. “We think there won’t be as much follow-through from OPEC as there has been in the past.”

Sloup added the market is expected to come under further pressure as US rig counts continue to rise, indicating production growth is outpacing demand.

“Headwinds from rising production and compliance issues will keep the upside limited for now,” Ole Hansen, head of commodity strategy at Saxo Bank told Reuters in an interview. He added that risks were “skewed to the downside” and the upside for Brent was limited to $53.

On Sunday, oil ministers from OPEC and some non-OPEC nations will meet in Kuwait where they are expected to discuss compliance with the OPEC pact.

Despite OPEC cuts, global stockpiles have risen and the Energy Information Administration reported on Wednesday that US crude inventories rose by a much larger amount than expected to 533.1 million barrels.