Oil prices pared early gains on Thursday despite USA industry data showing a big drop in crude stocks last week, with investors sceptical that OPEC-led cuts will be enough to rebalance an oversupplied market.
The main factor for Brent is whether a decision led by the Organization of the Petroleum Exporting Countries (OPEC) to extend a pledge to cut production by around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 will significantly tighten the market to end years of oversupply.
The start of the American summer driving season supported USA crude prices on Tuesday, but persistent concerns about oversupply continued to fester.
The Secretary General of OPEC, Mohammed Barkindo, believes it is too early to discuss ending the exemption from the oil production cut deal that Libya and Nigeria have been benefiting from, boosting their crude oil output in the last few months.
Brent crude futures for July were up 40 USA cents at US$51.16 a barrel by 0245 GMT. However, that understanding got broken as the production in the United States recovered by nearly 0.9 million barrels per day even as the oil price continued to hover below $50 per barrel.
OPEC pledged to reduce output by about 1.2 million barrels per day (bpd) for six months from January 1, 2018 as part of a deal with Russian Federation and other non-members.
Oil headed for its biggest weekly drop in four weeks as USA supply data signaled that OPEC's efforts to re-balance oversupplied markets need more time.
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As more USA drilling mean greater hardship for OPEC and other major producers' attempt to control output so as to cut the global supply glut and alleviate prices.
To provide additional support for prices, the producers decided at a meeting last week to prolong the deal until March 2018.
"It is necessary to work out new framework principles for continued steady cooperation between OPEC and non-OPEC even after the expiration of the Vienna agreements", said Novak.
Libya's crude oil production rose above a three-year high in May 2017.
The American Petroleum Institute (API) is scheduled to release its data at 4:30 p.m. EDT (2030 GMT) on Wednesday, and the U.S. Energy Information Administration (EIA) report is due at 11:00 a.m. EDT (1500 GMT) on Thursday, both delayed a day because of a holiday on Monday.
FXTM vice president of market research, Jameel Ahmad, said: "I maintain the viewpoint that the mindset of investors will remain tilted towards sell-on rally opportunities and I think traders are likely to continue entering selling positions around $50 as they have done for a number of months".