NEW YORK (Reuters) - Oil prices rebounded from earlier losses, but ended lower on the day, after the Energy Department reported a larger-than-expected decline in U.S. inventories and a falloff in weekly production on Thursday.
The market was pressured by a bearish outlook by the International Energy Agency, which lowered its forecast for oil demand for 2018.
Oil has strengthened in recent weeks, but it is unclear whether U.S. crude prices will regain the high of nearly $53 a barrel reached in late September. A surprise build in gasoline inventories fed concern that crude stocks may begin to rise again, sapping some strength from the recent rally.
Brent crude oil settled down 69 cents, or 1.2 percent, to $56.25 a barrel while U.S. light crude ended down 70 cents, or 1.4 percent, to $50.60 a barrel. Both benchmarks have risen more than 20 percent from their lows in June as world oil markets tightened.Crude inventories fell by 2.7 million barrels in the week to Oct. 6, compared with analysts' expectations for a decrease of 2 million barrels. Distillate stocks fell by 1.5 million barrels, but gasoline inventories surprisingly rose by 2.5 million barrels. [EIA/S]"With the U.S. already out of the summer driving season, there will be less demand for gasoline over the coming weeks - this could result in weeks of crude builds as oil production in the U.S. remains high," said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.The IEA said demand for OPEC oil would be 32.5 million barrels per day next year - around 150,000 bpd lower than the group pumped last month. [IEA/M]Gary Ross, founder of PIRA Energy and head of Global Oil Analytics for S&P Global Platts, said the global crude surplus has now largely been absorbed - and there was risk that OPEC could overshoot on its cuts. "We think (Brent) should make a new high before the end of the year," Ross said, speaking to reporters as the annual PIRA client seminar in New York. He said he expects crude to stay between $50 and $60 a barrel through the end of the year. U.S. crude inventories are still 13 percent above five-year averages headed into the busy winter season, despite efforts by OPEC to cut production. The OPEC-led deal helped lift oil from below $30 a barrel early last year. But traders say supplies remain ample and OPEC is widely expected to extend its cuts beyond the current expiry date of end-March 2018."There is little doubt that leading producers have re-committed to do whatever it takes to underpin the market," the IEA said.High U.S. production is pushing increasing volumes of U.S. crude into world markets, feeding inventories and undermining OPEC's efforts to tighten the market . U.S. exports fell in the most recent week to 1.27 million bpd, but U.S. exports have still exceeded 1 million barrels a day for three straight weeks, the first time this has happened.Traders have expressed concerns that the United States will at some point reach its export capacity, though that has not been hit yet. (Addititional reporting by Christopher Johnson in London, Henning Gloystein in Singapore and Scott DiSavino in New York)