Oil prices slipped to almost four-month lows March 22 after data showed U.S. crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June.
A deal between OPEC and some non-OPEC producers to reduce output by 1.8 million barrels per day (MMbbl/d) in the first half of 2017 has had little impact on bulging global stockpiles of oil.
OPEC, which sources say is increasingly leaning towards extending cuts, has broadly delivered on pledged reductions so far, but non-OPEC states have yet to cut fully in line with commitments.
"OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling," said Ole Hansen, head of commodity strategy at Saxo Bank.
Benchmark Brent crude was down 66 cents at $50.30/bbl at 6:41 a.m. CT (11:41 GMT), after dropping to $50.05, its lowest level since OPEC announced on Nov. 30 its plan for cuts. The deal with non-OPEC states was reached in December.
U.S. West Texas Intermediate light crude was down 63 cents at $47.61/bbl, also slipping towards its lowest in almost four months.
The American Petroleum Institute said March 21 that U.S. inventories climbed by 4.5 MMbbl to 533.6 million last week, outpacing analyst forecasts of 2.8 million.
Investors now want to see whether figures on March 22 from the Energy Information Administration, a unit of the U.S. Department of Energy (DOE), confirm the rise.
UPDATE: EIA: US Crude Stocks Rise To New High
"A look below $50 [for Brent] is quite possible today if DOE data show a similar pattern, but it's impossible to say how far below $50," Commerzbank analyst Carsten Fritsch said.
U.S. shale oil producers have been adding rigs, pushing up the country's oil production to about 9.1 MMbbl/d, from around 8.5 MMbbl/d in late 2016.
"OPEC's market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience," U.S. bank Jefferies said in a note.
But the bank said the market was undersupplied and, if OPEC extended cuts into the second half, inventories would draw down and prices recover above $60 in the fourth quarter.
However, it said U.S. crude production was expected to grow by 360,000 bbl/d in 2017 and 1 MMbbl/d in 2018, and a price recovery could spur more U.S. shale activity.
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