Feb. 15 (UPI) -- More signs of recovery in U.S. shale oil basins and indications of a build in inventories sent crude oil prices lower early Wednesday.
Crude oil prices rallied Tuesday to offset dramatic losses from earlier this week. Markets in general rallied after Federal Reserve Chair Janet Yellen issued a general upbeat assessment of the U.S. economy.
Oil prices have moved in a narrow band around $55 per barrel more or less since late 2016 as markets watch for signs of a healthy balance between supply and demand. An agreement by the Organization of Petroleum Exporting Countries to limit output has been countered by a rise in North American oil production, which reflects improved economics in the energy sector.
Markets early Wednesday were reacting to reports from the American Petroleum Institute that crude oil inventories in the United States continue to surge, pointing to possible short-term supply concerns in the world's No. 1 economy.
The price for Brent crude oil was 0.4 percent below the previous day's close to trade at $55.73 per barrel about a half hour before trading opened in New York. West Texas Intermediate, the U.S. benchmark price for oil, was down 0.5 percent to $52.94 per barrel.
Formal data on U.S. crude oil inventories and production levels are published late morning by the U.S. Energy Information Administration.
As OPEC leaders defend their role as a market stabilizer, U.S. shale oil producers are starting to return to work after idling operations during last year's market downturn. By March, U.S. shale oil production could increase and add to supply-side pressures on the broader market.
Stephen Brennock, an analyst with broker PVM, said the main source of shale oil growth is coming from the Permian shale, which is situated mostly in Texas. Permian production could account for most of the gains in U.S. shale oil production, which has in general proven more resilient to lower crude oil prices than initially expected.
"It is hard to foresee the U.S. shale recovery coming off the rails, much to the chagrin of OPEC," he said in an emailed report.