Oil struggles for direction as United States output concerns persist

A pump jack used to help lift crude oil from a well in South Texas’ Eagle Ford Shale formation stands idle in Dewitt County Texas

Latest data from the Energy Information Administration showed US output rose to 9.25 million barrels a day last week, the highest level since August 2015. Andrew Lipow, president of Lipow Oil Associates in Houston, said some in the market were concerned about the rapid recovery in shale production."Perhaps the amount coming out of the ground might be more than we anticipate", he said.

China's March gasoline output rose 2.5 percent year-on-year to 11.24 million tonnes, the highest level since at least April 2014, China's National Bureau of Statistics said, adding fuel into an Asian market that is already well supplied.

U.S. West Texas Intermediate (WTI) crude futures had risen 31 cents, or 0.61 percent, to $50.75 a barrel.

Iran pumped just shy of its 3.8 million barrels a day allowed under the deal in the first quarter, according to the International Energy Agency. Brent crude settled down 3.6 percent, or $1.96 a barrel, to $52.93.U.S. crude stocks fell 1 million barrels in the latest week, the U.S. Energy Information Administration said, a smaller draw than expected.

The fall in oil prices was, however, given some support by a report indicating that there was a decline in output in Saudi Arabia. "Total motor gasoline inventories increased by 1.5 million barrels last week, and are near the upper limit of the average range", said the report.

"The market sentiment appears to be that the increase in USA shale production outweighs the OPEC action and the market is keeping the loss we had yesterday", he said.

The continued growth in US production and the rise in stockpiles forced the market to respond bearishly based on the increased inventory outlook. Gasoline stocks posted a counter-seasonal build of 1.5 million barrels, despite heavier refining activity.The surprise gasoline build, along with an increase in US production and imports from OPEC nations, pressured prices. The industry body American Petroleum Institute had reported an increase of 2.254 million barrels in gasoline inventories on Tuesday, setting the stage for crude's slide. Distillate stocks reached their lowest levels since November 2015, the EIA said.

However, any interpretations of an oversupplied market moving towards a balance become questionable if product stocks start rising, especially gasoline, which should now be seeing a seasonal hump in demand.

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