Oil prices fell for the fourth consecutive day on Thursday, touching their lowest since March at just above $50 a barrel after U.S. crude inventories fell by less than expected.
U.S. data showed crude stocks fell 930,000 barrels in the week to April 28, while analysts had been expecting a drop of 2.3 million barrels. Stocks have steadily declined for the last four weeks, but at 527.8 million barrels they are just 7 million barrels off a record high.
Brent crude oil futures were down 63 cents at $50.16 by 1107 GMT, after bouncing off an intraday low of $50.01, the lowest since March 22. U.S. West Texas Intermediate (WTI) futures fell 59 cents to $47.23 a barrel.
Rising U.S. production and stubbornly high inventories remain key drivers of the oil price, but equally important is the level of compliance among members of the Organization of the Petroleum Exporting Countries to their pledge to cut output by 1.2 million barrels per day.
The expectation among analysts is for OPEC and its non-OPEC partners to extend the deal to keep up to 1.8 million bpd off the market later this month, but failure to do so could see disgruntled investors cut their bullish bets on the price.
Money managers have already cut their net long positions, bets on a further price rally, by a third in the last two months.
“We’ve had some pretty sharp price corrections already so it does reduce the risk of length liquidation. I do think as long as OPEC maintains the cuts, the price will get some stability,” Petromatrix analyst Olivier Jakob said.
“We still have some downside risk, but we’re starting to get near the bottom.”
OPEC oil output fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target, which helped offset weaker compliance by other members.
“Saudi Arabia is the only country that has fulfilled its obligation every month since January. On one hand, it shows its commitment from OPEC’s kingpin to make the supply cut agreement work. On the other hand, one can only ponder how long they are willing to shoulder the burden of supporting oil prices on their own,” PVM Oil Associates analyst Tamas Varga said.
Russia, which has contributed the largest production cut outside OPEC, said as of May 1, it had cut output by more than 300,000 bpd since hitting peak production in October.