Oil prices fell on Wednesday to their lowest in a week, on a strong dollar and expectations that US producers would boost output even as OPEC's output fell from a record high. US shale production is set to snap a three-month decline in February, the US Energy Information Administration said on Tuesday, as energy firms boost drilling activity.
Brent crude ended the session at $53.92 per barrel, down $1.55 or 2.79 percent, while US crude settled at $51.08, down $1.40, or 2.67 percent. Ahead of settlement, both contracts sank to their lowest since Jan. 11. The dollar strengthened against a basket of currencies, rising about 0.6 percent, which pressured greenback-denominated oil.
EIA projected oil production in the biggest US shale fields would rise by 40,750 barrels per day (bpd) to 4.748 million bpd in February. "The petroleum markets have turned lower again in Wednesday trade amid talk that higher oil prices will translate into additional US shale-oil production as a counter-balance to OPEC efforts to trim supply and reduce excess inventories," Tim Evans, Citi Futures' energy futures specialist, said in a note.
The Organisation of the Petroleum Exporting Countries (OPEC) signalled a shrinking global oil surplus. However, OPEC's monthly report also said US output could rebound as higher oil prices following supply cuts by other producers support increased shale drilling.
"OPEC's regular dose of bullish rhetoric intending to prop up values has begun to wear thin," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note. OPEC excluding Indonesia, pumped 33.085 million bpd last month, according to figures OPEC collects from secondary sources, down 221,000 bpd from November, OPEC said in a monthly report on Wednesday. The figures showed the biggest reduction came from Saudi Arabia.
OPEC, Russia and other non-OPEC producers in November and December pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.
Analysts forecast that US crude stocks decreased by about 300,000 barrels in the week to Jan. 13. The American Petroleum Institute (API) will release its inventory report on Wednesday at 4:30 p.m. EST. Weekly inventory data from the EIA will be released on Thursday at 11 a.m. EST (1600 GMT), both delayed a day because of the federal holiday on Monday.