Oil futures traded modestly lower on Tuesday, threatening to halt a string of gains at five, as traders paused following a brisk run-up above $50 a barrel by the U.S. benchmark fed by encouraging signs that efforts to tamp down output are taking hold.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, -0.60% fell 33 cents, or 0.6%, to $49.86 a barrel on Tuesday, while October Brent crude LCOU7, +2.19% retreated by 43 cents, or 0.8%, to $52.29 a barrel. Both contracts had been trading slightly higher earlier on the day.
Matt Smith, director of commodity research at ClipperData said that although a number of factors continue to be supportive to higher crude prices, recent reports showing production increases are providing a slight headwind in recent trade.
A survey from Reuters showed output from the Organization of the Petroleum Exporting Countries rose by 90,000 barrels a day in July, to a 2017 high of 33 million barrels.
“Libyan crude hitting the market closed out last month at 900,000 barrel a day so that is counteracting the effort to try and tighten this market ,” Smith said, referencing ClipperData’s own output statistics.
Smith also pointed to a monthly report from the Energy Information Administration indicating that total U.S. crude production grew 0.6% from April to the highest daily average for a month this year, as a reason oil may be pausing in early trade.
Overall, activity in crude futures was mostly subdued as investors awaited inventory reports from the American Petroleum Institute later Tuesday as well as a further report from EIA late Wednesday.
Analysts say a swath of positive news the past two weeks, such as ebbing U.S. inventories and slowing production, have lifted investor confidence in oil, which has been in the doldrums due to a large, persistent supply glut. That upbeat mood had helped push the U.S. benchmark back above $50 a barrel for the first time in two months.
Even EIA data on Monday revealed that U.S. growth might be easing, as May’s growth was the second slowest of 2017.
Rising U.S. shale production this year has been a thorn in the eye of OPEC and other non-cartel countries, including Russia, that have agreed to cut production in an effort to rebalance the oil market.
Still, recent “market sentiment has quite clearly turned, with price falls being viewed as an opportunity to buy, as can be seen from the marked increase in speculative net long positions,” analysts at Commerzbank said in a note.
Oil investors also monitored political developments in Venezuela—a member of OPEC and a major exporter of oil to the U.S.—after a referendum over the weekend that gave Venezuelan President Nicolás Maduro overwhelming power to redraft the country’s constitution. The U.S. on Monday imposed sanctions against Maduro, but didn’t include threatened measures against the country’s petroleum industry.
Read: How Venezuela chaos could spark oil rally OPEC has failed to achieve
Read: Oil surges higher, posts biggest monthly rise since April 2016
But it might still be premature to assume shale production will cool into year-end because capital-spending reductions the past several years have largely been a function of companies “being able to get more for every dollar invested,” said Energy Aspects.
Market technicians will be paying attention to crude’s trading averages, with WTI crude holding above its 200-day moving average at $49.46 a barrel and Brent’s long-term trading average at $51.81 a barrel, according to FactSet data. Technical analysts tend to look to moving averages for signs that an asset is showing a bullish or bearish trend.
Among other energy products, gasoline for September RBU7, -0.47% rose 0.2% to $1.68 a gallon and August ICE gasoil climbed 0.7% to $492.50 per metric ton.
September natural gas NGU17, -0.07% rallied 1.2% to $2.83 per million British thermal units.
— Barbara Kollmeyer contributed to this article
