That is a surprising divergence, as Brent is more exposed than WTI to higher production in Russian Federation and Saudi Arabia, said Michael McCarthy, chief market strategist at CMC Markets. Potential opposition from several producers could complicate the group's effort to reach a consensus when it meets next month in Vienna.
The drop was accompanied by relatively heavy volume suggesting some capitulation from the extreme long crude speculative positioning.
The OPEC-led alliance has lowered stocks close to its goal much quicker than expected due to supply outages in Venezuela and strong compliance to the 1.8 million b/d output cut deal.
USA and global benchmark oil prices diverged on Tuesday, with concerns about a potential rise in oil supply pulling West Texas Intermediate crude down for a fifth straight session. "The increase in crude prices comes on the back of an increase in customs duty on palmolein and crude oil in March this year and some of the impact will definitely have to be passed on to consumers", said Krishna Rao, category head of biscuits maker Parle Products.
U.S. West Texas Intermediate crude futures fell as much as 3% Tuesday, posting a fifth straight day of losses after hitting a 3½-year high last week. This is a strong indication that USA crude production will continue to rise. The output cuts helped revive the market at that time. However, an oil expert said these are short-term blips and there are plenty of options for oil producers to ease price hikes. Without compensating supply from other members, this number looks likely to expand as the U.S. reimposes sanctions on Iran and the collapse of Venezuela's oil industry worsens.
Pressure has been on the rise since the International Energy Agency published its monthly report acknowledging that the oil market was now balanced and that commercial glut in major industrial countries fell by about 1 million barrels.
India's Reliance Industries Ltd, owner of the world's biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said.
This reversal is in line with our baseline view that the rally in oil prices was a deviation from market supply-demand fundamentals and a moderation is oil prices was in the offing. Oman's Oil Minister Mohammed Al Rumhi may join, they said.
Data from industry group American Petroleum Institute (API) showed that USA crude inventories rose unexpectedly last week, increasing by 1 million barrels against analyst expectations of a 525,000-barrel decline. The countries are said to have concluded that the market re-balanced in April.
"Some 10 percent is probably the maximum level", he said.
OPEC has been monitoring OECD inventories closely, and not just because its target in the cuts was the OECD inventory five-year average. The current United States rig count, that is the number of active rigs drilling for petroleum in the USA and a major indicator of the health of the U.S. oil industry, hit its highest level of the year last week.