By Sarah McFarlane and Dan Molinski 
   -- Oil prices declined Thursday as investors worried about rising U.S. oil 
      production and bulging inventories of gasoline amid sluggish demand that 
      may point to an upcoming economic slowdown. 
 
   -- West Texas Intermediate futures, the U.S. oil standard, ended 0.5% lower 
      at $52.07 a barrel on the New York Mercantile Exchange. The decline ended 
      a two-session upward streak. 
 
   -- Brent crude, the global oil benchmark, ended 0.2% lower at $61.18 a 
      barrel on London's Intercontinental Exchange. 

HIGHLIGHTS

Stock Markets: Keeping oil prices subdued throughout much of the session were U.S. stocks that traded lower Thursday morning after overnight weakness in European and Asian markets, reducing some speculative risk appetite. Wall Street began to recover later in the session, while oil markets digested other issues including the U.S.-China trade dispute and broader global issues. "Oil markets are monitoring geopolitical risks," said Michael Wittner, global head of oil research at Société Générale. "Venezuela has entered a period of increased political uncertainty, with higher risks of instability; the opposition is making the case that [President Nicolas] Maduro is no longer the legitimate leader of the country."

U.S. Inventories: The Energy Information Administration said Wednesday U.S. oil inventories fell by 2.7 million barrels last week, but gasoline inventories rose by 7.5 million barrels, taking them to the highest total in nearly two years and sparking more worries about sluggish demand. The data also showed U.S. oil production surged to a new record-high 11.9 million barrels a day.

"This report does little to alleviate ongoing concerns," said analysts at Simmons Energy in a research note Thursday. "We wouldn't be surprised if the ugly product stats begin weighing on the overall crude complex, as there is a lingering concern that bloated product inventories shift into the crude inventories as refinery maintenance kicks off."

The EIA also published its latest Short Term Energy Outlook projecting U.S. production would rise by 1.14 million barrels a day on the year to an average of 12.07 million barrels a day in 2019. This could be a headache for the Organization of the Petroleum Exporting Countries, which has been cutting its output in the hope of stabilizing prices and preventing global inventories from rising. "OPEC will have to adapt to whatever output is coming from the U.S.," said Mr. Poulsen, adding that America's export capacity would rise this year with some new infrastructure projects due to come on line.

INSIGHT

OPEC cuts: Members of OPEC and its allies agreed in December to cut output starting this month, and data Thursday suggest it got an early start on the cutbacks in December. In its closely watched monthly oil market report, OPEC reported a 751,000 barrel-a-day decline in crude output last month, to average 31.58 million barrels a day. The drop off was primarily driven by Saudi Arabia -- the de facto head of OPEC and the world's largest exporter of crude -- with a reduction of 468,000 barrels a day, according to the cartel.

Those cuts highlight the continued tug-of-war in the investing community as it tries to weigh the bullish signals coming from OPEC against the bearish signals coming from U.S. production and fuel inventories.

AHEAD

Baker Hughes reports its weekly rig-count report on U.S. drilling activity on Friday.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Dan Molinski at Dan.Molinski@wsj.com

 

(END) Dow Jones Newswires

January 17, 2019 15:29 ET (20:29 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.