Oil prices gave up earlier gains as the relentless rise in US crude production threatens to undermine efforts led by producer cartel OPEC to tighten the market.
Brent crude futures LCOc1 were at $69.34 per barrel at 0750 GMT, down 13 cents, or 0.2 per cent from their last close.
US West Texas Intermediate (WTI) crude futures CLc1 were at $65.13 a barrel, down 4 cents from their previous settlement.
Both benchmarks on Wednesday hit their highest levels since early February, having risen around 10 per cent from March lows.
An overall mood of confidence in the oil market is being tempered by US crude production C-OUT-T-EIA, which climbed to a fresh record of 10.4 million barrels per day (bpd) last week, putting the United States ahead of top exporter Saudi Arabia and within reach of Russia’s 11 million bpd.
Despite the relentless rise in US output, up by almost a quarter since mid-2016, traders said oil markets remain well supported.
In a sign of healthy demand, US crude inventories C-STK-T-EIA fell 2.6 million barrels in the week ended March 16 to 428.31 million barrels, the Energy Information Administration (EIA) said late on Wednesday.
“Inventory data for last week showed a surprise crude draw as well as significant drawdowns in both gasoline and distillates inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
Dutch bank ING said the drawdown in US crude inventories was down to a fall in imports by around 500,000 barrels per day (bpd) to an average 7.08 million bpd last week, and a rise in exports by 86,000 bpd to an average 1.57 million bpd. Also, refinery utilization rates rose above 90 per cent for the first time since early February.
According to Reuters, further supporting oil prices has been supply restraint led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which started in 2017 and is scheduled to go on for the rest of 2018.
OPEC said on Wednesday the cuts were close to having the desired effect of bringing down global inventories to five year averages, although it gave little detail.
US bank Goldman Sachs said OPEC was “likely to overshoot on the inventory rebalancing”, and as a result, it saw Brent reaching $82.50 per barrel by mid-year.”