NEW YORK (Reuters) - Oil futures turned negative on Wednesday, pulling back after eight straight sessions of gains after U.S. crude inventory data suggested that the market was still heavily supplied. Traders focused on preliminary U.S. production estimates included in the weekly EIA report that suggest domestic output is continuing to climb. The report also showed stockpiles at the U.S. crude hub at Cushing, Oklahoma rose 276,000 barrels in the week.
The data however did show an unexpected drop in overall U.S. crude inventories, which fell in the week by 2.2 million barrels as imports declined by 717,000 barrels a day. Brent oil gained for an eighth straight session on Wednesday, having recovered nearly all last month's losses, after Saudi Arabia was said to be pushing its fellow OPEC members and some rivals to prolong supply cuts beyond June.
Brent crude futures were down 17 cents at $56.06 a barrel by 10:43 a.m. EDT (1543 GMT), having touched a one-month high of $56.65. U.S. West Texas Intermediate (WTI) crude futures were down 13 cents at $53.27 a barrel.
The U.S. data followed more bullish data from OPEC nations, which said they had cut March oil output beyond the measures they had promised. OPEC countries cut oil output in March by more than they pledged, according to figures the group published in a monthly report, as it sticks to an effort to clear a supply glut that has weighed on prices. [OPEC/M]
"What they're losing in market share the U.S. is looking to pick up," said Oliver Sloup, market analyst at iitrader.com "I don't think there's much room above $55." Saudi Arabia, de-facto leader of the Organization of the Petroleum Exporting Countries, has told other producers that it wants to extend the coordinated production cut beyond the first half of the year, the Wall Street Journal reported.
"The main question is what OPEC will decide. On the one hand, it seems logical to assume that OPEC will expand the agreement to prevent triggering a large drop in oil prices," ABN Amro senior energy economist Hans van Cleef said. "If OPEC decides not to continue its current policy, the market would immediately start to price in a new situation of lingering oversupply. This would again increase the pressure on
OPEC and other producers, including Russia, have pledged to cut output by around 1.8 million barrels per day (bpd) during the first half of 2017 to rein in oversupply. Fearing a loss of market share, Saudi Arabia is shielding its most important customers in Asia from the cuts, continuing to supply them with all contractual volumes.
In the United States, production and inventories are surging. The government's Energy Information Administration (EIA) said U.S. 2018 crude output would rise to 9.9 million bpd, from 9.22 million bpd this year. With demand expected to rise by 340,000 bpd in 2018, that would leave increasing amounts of U.S. oil for export or storage. U.S. crude inventories hit a record 535.5 million barrels this month.