(UPI) — Crude oil prices edged lower early Tuesday with bearish sentiments becoming entrenched as trends outside an OPEC-led balance effort add to supply-side concerns.
Crude oil prices are pulling further away from the psychological threshold of $50 per barrel. An agreement led by the Organization of Petroleum Exporting Countries to calm the market with managed production declines has created economic conditions supportive of U.S. shale oil production gains, which is capping any major rally in crude oil prices.
Ole Hansen, the head of commodity strategy at Saxo Bank, said in a daily report that OPEC’s efforts are being thwarted even as it considers extending the arrangement by at least six more months.
“While OPEC is trying to cut production, Libyan output is at its highest level since October 2014 and U.S. shale oil has added 800,000 barrels to the market,” he said.
Libya and Nigeria are two OPEC members exempt from the production declines so they can lean on oil revenue to help ensure national security. Iran is the only OPEC member with room for growth because it wants to retake a market share lost to sanctions.
Market watchers are anticipating production and inventory levels published late in the day by the American Petroleum Institute. A survey of industry sentiment from S&P Global Platts predicted a draw on U.S. crude oil inventories of 1.8 million barrels and a gasoline stock decline of 700,000 barrels.
“Despite counter-seasonal drawdowns, traders have been decidedly bearish,” Oil Futures Editor Geoffrey Craig said in an emailed report. “One factor weighing on trader positioning is U.S. crude production, which continues to climb and offset the impact of OPEC-supply cuts.”
Crude oil prices were in modest decline before the start of U.S. trading. The price for Brent crude oil was down 0.3 percent about a half hour before the opening bell to $49.19 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.28 percent to $46.30 per barrel.
Crude oil prices could get some support later in the month as OPEC members and other participating producers meet to consider the terms of the production arrangement. Lower crude oil prices, meanwhile, mean lower gasoline prices and U.S. consumers could put some demand pressure back in the market in the way of travel plans for the upcoming Memorial Day holiday.