Oil prices dip as focus returns to global supply overhang

Crude prices dipped on Thursday as brimming US and Asian fuel inventories returned investor attention to a large global supply overhang, cutting short a price-rally and restricting Brent crude futures to below the $50 a barrel mark.

International benchmark Brent crude oil futures were trading down 7 cents at $48.98 per barrel at 0413 GMT, having closed down 1.8 per cent.

US West Texas Intermediate (WTI) crude futures were at $46.74 a barrel, down 3 cents, after dropping 2.8 per cent on Wednesday.

Traders said price falls this week had truncated a rally that pushed crude up by more than 20 per cent earlier in August on talk of a potential deal by oil producers to freeze output in an effort to rein in oversupply.

Hopes of a deal were dampened by record output from the Organization of the Petroleum Exporting Countries (OPEC) and little prospect of voluntary restrictions.

"Brent also came under pressure after (OPEC-member) Iraq said it still isn't producing as much oil as it should be, raising concerns that OPEC supply will continue to increase," ANZ bank said on Thursday.

With output high, not just from OPEC but also other top producers like Russia, and the demand outlook shaky, analysts said there was little prospect of an end to the glut, which has pulled down crude prices from over $100 a barrel to their current sub-$50 levels since 2014.

Analysts said that high storage levels pointed to an ongoing supply overhang that was weighing on markets.

In the United States, commercial crude oil stocks rose by 2.5 million barrels to 523.6 million barrels.

In refined products, stocks around the world are also brimming as demand slows while refinery output remains high.

"Ample inventories were due to weaker demand in Asia, but more generally were driven by excess supply generated by refiners maximising runs, notably to produce gasoline in the US," BNP Paribas said.

China's implied oil demand fell 0.3 per cent from a year earlier to 10.58 million barrels per day (bpd) in July, according to Reuters calculations using official data.

"In Asia, China's July economic statistics confirmed loss of growth momentum," BNP added.

The French bank said that the "lacklustre demand prospects (and) the augmented capacity of the global refining system ... suggest (that) a distillate supply overhang will persist".