U.S. oil prices ease from two-year highs on oversupply worries

U.S. oil prices eased back from a two-year high on Thursday, as concerns about oversupply outweighed the impact of a pipeline shutdown in the United States.

U.S. light crude was trading down 17 cents at $57.85 a barrel at 1015 GMT, slipping from its highest level since mid-2015 reached on Wednesday of $58.15.

Brent crude was at $62.98 per barrel, or 34 cents below its last close.

U.S. crude had been boosted by the shutdown of the 590,000 barrel-per-day (bpd) Keystone pipeline, which runs from Canada to the United States. Last week’s closure due to an oil spill sent crude prices to their highest since June 2015.

But rising production in the United States has renewed concerns about global oversupply. U.S. output has risen by 15 percent since mid-2016 to a record 9.66 million bpd.

The United States, previously the world’s biggest importer of crude oil, is now one of its biggest exporters, behind Russia and Saudi Arabia.

“The U.S. will, without question of doubt, be the biggest oil producer in the world in the next five years. They are producing… at half the cost than they were just two years ago,” said Matt Stanley, fuel broker at Freight Investor Services in Dubai.

Climbing U.S. output threatens efforts by the Organization of the Petroleum Exporting Countries, Russia and some other non-OPEC producers to reduce global supplies by limiting their production. Their deal ends in March.

OPEC meets on Nov. 30 to discuss policy, with Saudi Arabia lobbying for an extension to the cuts. However, Russia has sent mixed messages on its position, saying on Thursday that the cuts had hit its economy.

Nevertheless, prices continue to find some support from a drawdown in commercial fuel inventories in the United States.

U.S. stocks fell 1.9 million barrels in the week to Nov. 17, to 457.14 million barrels. Stocks have dropped 15 percent from record highs in March to below 2016 levels.

“Lower supplies into the U.S. from the north and robust exports from the south are likely to support a further reduction in U.S. inventories,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Source: Reuters (By Polina Ivanova; Reporting by Henning Gloystein; Editing by Edmund Blair)