Oil prices fell on Thursday as record U.S. crude inventories underscored that crude markets remain bloated, despite efforts led by OPEC to cut output and prop up prices.
Brent crude futures, the international benchmark for oil, were at $54.07 per barrel at 0310 GMT, down 29 cents, or 0.5 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 30 cents, or 0.6 percent, at $50.85 a barrel.
Traders said the falls came on the back of rising U.S. crude production that bolstered inventories to record levels.
U.S. fuel inventories and oil production levels are key to whether the United States will remain the world’s biggest oil importer, helping to support prices, or if its soaring output and large stocks lead to more exports to the rest of the world, which would weigh on oil markets.
The U.S. Energy Information Administration (EIA) reported a 1.57 million barrels increase in crude inventories late on Wednesday, bringing total U.S. stocks to a new record of 535.5 million barrels.
“Overnight crude inventory numbers pulled the rug out from under the feet ofthe oil rally,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.
The record crude inventories came as U.S. oil production rose 52,000 barrels per day (bpd) to 9.2 million bpd, a more than 9 percent increase since mid-2016 to levels last seen at the start of the oil market slump in late 2014 and early 2015.
Within the U.S. crude inventories, stocks at Cushing, the storage and delivery hub for U.S. WTI, rose 1.4 million barrels to a record 69.1 million barrels. Rising stocks at Cushing, in Oklahoma, typically tend to depress the price of the U.S. benchmark.
Cushing crude tank farms have a total storage capacity of 77 million barrels, said Ole Hansen, head of commodity strategy at Saxo Bank.
U.S. Gulf Coast inventories also jumped, by 2.7 million barrels, to a peak of 280.9 million barrels, the EIA said.
Because of the glut, U.S. crude exports have soared to a record 1.1 million bpd, with most cargoes going to Asia, eroding efforts led by the Organisation of the Petroleum Exporting Countries (OPEC) to cut output in an effort to prop up prices.
Somewhat offsetting the bloated U.S. market, however, is strong demand. ANZ bank said that high refinery activity negated some of crude weakness, with refineries operating at 90.8 percent capacity last week, up 1.5 percent from the previous week.