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Oil prices drop to two-week lows as oversupply concerns linger

Reuters  |  SEOUL 

By Jane Chung

SEOUL (Reuters) - prices fell nearly 1 percent on Friday to hit two-week lows, dragged lower by persistent oversupply worries despite a bigger-than-expected drawdown in U.S. crude inventories.

Investors were also keeping a close eye on the broad market impact of tensions between the United States and North Korea.

Brent crude, the benchmark, was at $51.42 a barrel at 0524 GMT, down 48 cents, or 0.92 percent from its last close. That was the lowest since July 27.

U.S. West Texas Intermediate (WTI) crude was down 44 cents, or 0.91 percent, at $48.15 per barrel, reaching the lowest since July 26.

prices touched 2-1/2 month highs on Thursday, but retreated to close down around 1.5 percent, with U.S. prices slipping back below $50 per barrel amid ongoing oversupply concerns.

"Crude prices failed to hold recent gains, with a nervous market starting to doubt recent falls in inventories," ANZ bank said in a note.

"Supply-side issues also weighed on prices, with data showing Libyan production in July hit its highest level for the year."

Meanwhile, U.S. President Donald Trump stepped up his rhetoric against North Korea again on Thursday, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

"I think the issue that is affecting the market is the general risk sentiment of sabre-rattling between Washington and Pyongyang," said Michael McCarthy, chief market strategist at CMC Markets.

Official data showed crude inventories in the United States, the world's top consumer, fell sharply by 6.5 million barrels in the week ending to Aug. 4, as refiners ramped up run rates to the highest in 12 years due to strong demand. [EIA/S]

But doubts remain over whether enough crude would be consumed to end a glut after the Organization of the Petroleum Exporting Countries (OPEC) reported on Thursday another increase in the cartel's production, even though it raised outlook for demand in 2018.

OPEC said its output rose by 173,000 barrels-per-day (bpd) in July to 32.87 million bpd.

Faced with lingering glut woes, OPEC and some non-OPEC members including Russia in May extended production cuts to reduce 1.8 million bpd.

Meanwhile, Russian producer Gazprom Neft is considering resuming production in mature fields after the OPEC-led production cut agreement, a representative of the company said on Thursday.

Rising output from Nigeria and Libya is further undermining the producers' attempt to limit production. Nigeria and Libya are exempted from curbing output as they seek to restore supplies hurt by internal conflicts.

(Reporting by Jane Chung; Editing by Richard Pullin and Joseph Radford)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, August 11 2017. 11:14 IST