US oil production last week was steady at 10.27 million barrels per day, a record level if confirmed by monthly figures. Crude exports jumped to more than 2 million bpd, close to a record 2.1 million hit in October.
“The US is pumping out a record amount of oil,” said Naeem Aslam, chief market analyst at Think Markets UK Ltd.
“The bull rally which we have seen for the black gold could fade away as the US oil production undermines the OPEC production cut commitments,” he said.
Brent crude, the global benchmark, was down 45 cents at $65.94 at 1052 GMT. Prices had rallied in early 2018 and reached $71.28 on Jan. 25, the highest since December 2014. US crude fell 34 cents to $62.43.
Oil also slipped as the US dollar strengthened. A stronger dollar can make oil and other commodities denominated in the US currency more expensive for other currency holders.
The latest decline for crude came despite the US Energy Information Administration reporting crude stocks fell unexpectedly by 1.6 million barrels. Analysts said low import figures contributed to the decline.
US production is expected to rise even more this year and top 11 million bpd in late 2018, a headwind for OPEC efforts to drain stockpiles.
“I think the pace is excellent, the deal is working and we’re very happy with it,” United Arab Emirates Energy Minister Suhail al-Mazroui, the current OPEC president, told Reuters on Wednesday. “But the job is not yet complete.”
In January 2017, OPEC and allies including Russia began to cut production by about 1.8 million bpd, almost 2 percent of global supply, to get rid of a glut that had built up since 2014 and that led to a price collapse.
OPEC wants to reduce oil inventories held by industrialised nations to their five-year average and is getting closer to that goal, although officials are starting to talk about looking at different metrics.