Investing.com – Oil prices halted their rally on Tuesday as Genscape data showed a large build in crude inventories at the Cushing hub.
According to market sources, the inventory data released by Genscape revealed a build of 1,038,251 barrels for the week ending December 30th.
Oil prices hit an 18-month high on the back of a rally started early Tuesday in crude’s first day of trading in 2017 after the long New Year’s weekend.
However, black gold pulled an about face after the data was reported, falling more than 2% to session lows.
The data came one day ahead of readings from the American Petroleum Institute as well as the official data from the Energy Information Administration on Thursday.
Genscape inventory data measures supplies at Cushing, Oklahoma, the key delivery point for Nymex crude.
Crude oil for February delivery on the New York Mercantile Exchange jumped earlier to a session peak of $55.24 a barrel, a level not seen in 18 months. It was last down 2.51% at $52.37 by 12:21PM ET (17:21GMT), after hitting a session low of $52.26.
Elsewhere, Brent oil for March delivery on the ICE Futures Exchange in London had rallied to a daily high of $58.38, the most since July 2015, before tumbling 2.16% to $55.59, close to a session low of $55.58.
January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day.
The deal, if carried out as planned, should reduce global supply by about 2%.
However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.
There are also some worries in the market about production increases in Libya and Nigeria, which are both allowed to ramp up production as part of the OPEC deal.
Meanwhile, indications of increased drilling activity in the U.S. remained in focus. Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. last week increased by 2 to 525, the ninth straight weekly rise and a level not seen in almost a year.
Some analysts have warned that the recent rally in prices could be self-defeating, as it encourages U.S. shale producers to drill more, adding to concerns over a global supply glut