Brent Loses Steam After Rising Above $50 First Time in Six Weeks

(Bloomberg) -- Oil lost steam after earlier jumping above $50 a barrel in London for the first time in six weeks.

Brent crude swung between gains and losses after advancing as much as 1 percent. U.S. crude inventories slipped 4.73 million barrels last week and nationwide total crude and product inventories tumbled by 10.2 million barrels to 1.32 billion, the lowest level since December, data from the Energy Information Administration showed Wednesday. Meanwhile, U.S. crude production is at the highest level since July 2015.

“You’re getting a lot of positioning,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said by telephone. “Breaking $50 on Brent probably encouraged some people who’ve been long to say, ‘I think I’m going to take tomorrow off, so let’s just cash in and go home.”’

The global benchmark has traded below $50 since the start of June amid concerns that growing U.S. production is offsetting curbs by the Organization of Petroleum Exporting Countries and its partners. OPEC and non-member countries will meet later this month in St. Petersburg, Russia, to help monitor compliance with the output deal. Persevering with supply cuts means “prices will at best stay where they are,” while deepening the curbs would only boost U.S. output further, according to Natixis SA.

Eyes on Production

Brent for September settlement slipped 18 cents to $49.52 a barrel at 12:53 p.m. New York time on the London-based ICE Futures Europe exchange. Earlier, it touched $50.19 a barrel, the highest intraday level since June 6. The global benchmark crude traded at a premium of $2.43 to September WTI.

WTI for August delivery, which expires Thursday, slid 19 cents to $46.93 a barrel on the New York Mercantile Exchange. The more-active September contract fell 24 cents to $47.08.

See also: Militants no longer bomb Nigerian pipelines, but oil thieves keep a lid on output

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, fell for a ninth week to 57.5 million barrels last week, the longest stretch of declines since June 2014, EIA data showed. Gasoline stockpiles decreased by 4.45 million barrels, the largest fall since March, yet U.S. crude production rose to 9.43 million barrels a day in the week ended July 14, the third week of expansion.

“We had a really positive report yesterday. The draws exceeded estimates,” Tamar Essner, an energy analyst at Nasdaq Inc. in New York, said by telephone. But “that’s overshadowed by the fact that production went up in the U.S. and you still have increased exports coming out of Iraq. We’re not out of the woods yet, but the report yesterday was significant.”

Oil-market news:

• Iraq is proceeding with plans to raise oil production to 5 million barrels a day by the end of the year including the Kurdistan region, Iraq’s Oil Minister Jabbar al-Luaibi told reporters.

• Nigeria’s crude exports could fall month over month in September, according to 13 loading programs released so far.

• OPEC shipments will decrease to 24.09 million barrels a day in the four weeks to Aug. 5 versus the period to July 8, tanker-tracker Oil Movements said in a weekly report.

• Analysts and traders are bullish on WTI crude futures, according to Bloomberg’s weekly survey.

• Saudi Arabia’s crude stockpiles fell in May for the third month in a row, reaching the lowest level in more than five years.

--With assistance from Heesu Lee and Grant Smith

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Jim Efstathiou Jr., Carlos Caminada

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