Oil edges higher as OPEC boost offsets dent from U.S. supply

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Oil prices fell on Tuesday on news that US shale oil output was expected to post the biggest monthly rise in more than two years, fuelling concerns that USA production growth is undermining OPEC-led efforts to rein in oversupply.

U.S. petrol stocks posted a counter-seasonal build of 1.5-million barrels, because of rising refining activity.

US West Texas Intermediate (WTI) crude futures were also down 4 cents at $52.61 a barrel.

Traders opined that oil prices gained support as OPEC's secretary general assured that the oil cartel is committed to rebalance market stability by bringing down crude stocks down across the globe to the industry's five-year average.

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OPEC and non-OPEC producers agreed in December 2016 to cut supplies for six months, helping lift oil prices to about $55 a barrel after a two-year slump.

During the period, USA crude oil imports averaged over 7.8 million barrels per day, down by 68,000 barrels per day from the previous week.

The oil market has been caught in a tug-of-war, with OPEC production cuts supporting prices while signs of rising US production have pressured crude on concerns about a glut.

USA crude futures settled down $US1.97 to $US50.44 a barrel, a 3.8 per cent drop, the worst-one day decline since March 8, as investors bailed out of long positions in response to the bearish inventory figures.

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Both benchmarks had traded more than 50 cents higher earlier in the day, but gains eased at the start of US trading hours.

Global benchmark Brent crude futures swooned as low as $54.61, the lowest since April 7, then settled down 47 cents at $54.89 a barrel. The surprise build, along with an increase in U.S. output and imports from OPEC, pressured prices. Brent futures posted modest gains, however, ending up 6 cents to $52.99 a barrel.

Traders said that the rising United States crude production posed a concern that the oil supply overhang would continue, while the jump in petrol stocks implied a stutter in demand. According to a report on monthly drilling productivity report by the Energy Information Administration, the output of crude from shale plays will increase to a level of 5.2 million barrels per day next month. US production rose to 9.252 million barrels a day in the most recent week, highest since August 2015.

"It all depends on Russia's position", an OPEC delegate said overnight.

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It is too soon to talk about Iran, Libya and Nigeria joining the cuts if the output reduction agreement is extended beyond June, UAE Energy Minister Suhail al-Mazrouei said at the Abu Dhabi conference. However, that level was still near a record high.

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