Despite hitting a five-week high, crude oil slightly inched lower during Tuesday's trading session on reports of a rising US shale oil production slightly pared the gains oil prices gathered due to the the tension in Syria.
USA crude oil production C-OUT-T-EIA has risen by 9 percent since mid-2016 to 9.2 million bpd, resulting in a surge in commercial inventories to a record 535.5 million barrels C-STK-T-EIA. Traders attributed the up-and-down action to the drawdown in inventories against another increase in USA production, higher inventories at the Cushing, Oklahoma, oil hub, and traders exiting profitable trades after the last two weeks of price gains.
USA crude supplies fell by 1.3 million barrels last week, the American Petroleum Institute was said to report.
West Texas Intermediate, the USA benchmark, was up 0.3 percent at $53.23 a barrel as of 1:42 p.m.in NY.
Last year, OPEC and external producers including Russian Federation committed to eliminating about 1.8 million barrels of oil a day in a bid to rebalance the oil market and raise petroleum prices.
However, while the agreement was triggered by a rational set of good intentions, it "just missed paving the road to hell" for OPEC as rival producers raised their output, Citi said.
It comes at the same time the USA oil rig count rose to its highest level in two years, threatening the rebalancing of markets.
A further rise in supply outside the group could weigh on prices and hinder OPEC efforts to clear the glut, although OPEC officials have said they believe the market can deal with renewed shale growth. "This upward revision is also supported by a more balanced oil market, a key factor buttressing output levels in oilproducing nations and leading to rising investments in the energy sector", the cartel's March report read.
"Despite some downside risks, general expectations for demand growth for oil products in the coming months remain bullish", according to the monthly report from OPEC's Vienna-based secretariat.
Oil prices had been moving higher Wednesday after Saudi Arabia, the world's top crude exporter, told major producers that it favored extending the deal to curtail production beyond its initial six-month term, according to people familiar with the matter.
United States Oil (USO) has gained 0.36%, while the Energy Select Sector SPDR (XLE) has fallen 0.35%.
Since the OPEC cuts, medium-heavy crude supplies from the Middle East to Asia have tightened, incentivising traders to move similar oil from Europe and the Americas to meet Asia's demand.
The bank forecasts US oil production increasing between 700,000 and 800,000 bpd next year, and continued growth from deepwater oil formations and the oilsands.
Comments from OPEC officials will continue to be monitored closely and position adjustment is likely to be an important focus in USA trading on Thursday ahead of market holidays on Friday.
While speculation that the Organization of Petroleum Exporting Countries and its allies will extend their six-month pact aimed at eroding a global glut is helping boost prices, there's also concern that rising U.S. output will counter the reductions.
"This demonstrates the willingness of all participating countries to continue their cooperation", OPEC said in a statement last month. The Energy Information Administration reported on Wednesday that USA crude stocks fell 2.2M barrels in the week ended April 7, following the preceding week's gain of 1.6M barrels.