Crude oil futures rebounded on Thursday after dropping to their lowest level in almost three weeks as traders worried that domestic production would offset the production cuts being made by OPEC, according to Bloomberg MarketWatch.
On the New York Mercantile Exchange, May West Texas Intermediate crude oil futures settled at $50.96 a barrel, up 11 cents, or 0.2%.
On the London ICE Futures Exchange, June Brent crude, the global benchmark, rose 15 cents, or 0.3%, to end trading at $53.33 a barrel.
Oil prices fell by nearly 4% in the NYMEX session on Wednesday, marking the steepest drop since March 8. The decline was mainly due to the surprise build in domestic gasoline stockpiles that point to weaker-than-expected demand at a time when consumption of gasoline usually rises.
“What people are worried about is no one knows exactly what the breakeven cost is for the U.S. shale producers,” said Phin Ziebell, an economist at the National Australia Bank.
The most recent data from the Energy Information Administration revealed U.S. output rose to 9.25 million barrels a day last week, the highest level since August 2015.
This means that the current price level of $50-$55 is sufficient for the U.S. upstream players to keep their operations running while pouring more money to advance their technology, noted Ziebell.
As domestic production costs fall, pressure on other oil producers intensifies, especially for those in OPEC that are trying to buoy prices by curbing production.
Since the start of the year, oil prices have risen nearly 20% after OPEC agreed to slash their output by nearly 1.8 million barrels a day. During this period, U.S. production has risen 3.4%, or at least 300,000 barrels a day.