Investing.com -- Crude futures inched down on Wednesday as the International Energy Agency suggested a prolonged battle between the U.S. and OPEC for global market share has yet to reach its tipping point.
The comments came as monthly data provided indications that a glut of global supply has remained constant, as a slowdown in U.S. shale production has failed to offset increased OPEC output, as well as a surge in output from a host of unexpected emerging markets.
In its monthly report released on Wednesday, the IEA said that global oil supply stood at 95.7 million barrels per day, remaining unchanged from the previous month. Boosted by a spike in production from Iraq and Iran, OPEC increased output by 160,000 bpd for the month from an upward revised 960,000 bpd gain in March. OPEC's supply level for April exceeded 31.2 million bpd, its highest level since September, 2012.
Meanwhile, unexpected spikes from unsuspected corners of the globe has helped ensure that global supply remains at near record-highs. Production in Russia increased sharply for the month by 185,000 barrels per day on a year-over-year basis, while output in Brazil soared by 17% in the first quarter of the year. China, Vietnam and Malaysia also posted steady gains, according to the IEA.
On the Intercontinental Exchange (ICE), brent crude for July delivery ticked down 0.16 or 0.23% to 67.22 a barrel. Brent futures have closed over $65 a barrel for the last dozen trading sessions, dating back to April 27.
In the U.S., the Energy Information Administration (EIA) said in its weekly inventory report that crude stockpiles last week fell by 2.2 million barrels to 484.8 million, amid strong refinery demand. It comes a week after inventories declined by nearly 4.0 million barrels for the week ending May 1, marking the first time crude buildups moved lower on the year. In April, crude storage peaked at a record 490.9 million barrels, the highest in at least 80 years, exacerbating concerns that the U.S. could reach full storage capacity before the start of the summer.
On the New York Mercantile Exchange, WTI crude for June delivery gained roughly 25 cents after the release to $61.75, before falling under $61, as investors locked into gains. Texas Long Sweet futures settled at 60.45, down 0.34 or 0.50%. The spread between the international and U.S. domestic benchmarks of crude stood at $6.77, above Tuesday's level of 6.63.
WTI crude is still up more than 35% since bottoming at $44 a barrel in mid-March, as slowing shale production has eased fears of oversupply. Last summer, crude peaked at over $100 a barrel before OPEC triggered a crash in prices in November with a decision to keep its production levels constant.
The EIA expects U.S. shale production to decline even further in the coming months, as it predicts a drop of more than 54,000 in May followed by a reduction of more than 86,000 in June, according to its Drilling Productivity Report. A modest increase of 7,000 bpd at the Permian basin in West Texas will not be enough to offset significant declines at the Eagle Ford formation in South Texas and the Niobrara shale formation in the Midwest, the EIA predicts.
A raft of soft economic data pushed the dollar to its weakest level in three months. The poor economic indications on Wednesday weighed heavily on the dollar. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 1% to an intra-day low of 93.51 – the lowest level since early-February. By comparison, the index moved above 100 on six consecutive sessions in mid-March and reached as high as 100.27 on April 13.
EUR/USD soared more than 1.3% to 1.1362, its highest level in a week. Crude prices usually rise when the euro strengthens against the dollar.
Energy issues could be near the top of the agenda at a U.S. summit with Persian Gulf nations at Camp David later this week. Crown Prince Mohammed bin Nayef is expected to represent Saudi Arabia at the summit, replacing Saudi King Salman, who declined an invitation from U.S. president Barack Obama.
"It would be premature to suggest that OPEC has won the battle for market share," the IEA said in its report. "The battle, rather, has just started."