May 10 (UPI) -- Crude oil prices moved into short-term recovery mode early Wednesday after industry data showed U.S. oil inventory levels are on the decline.
Crude oil prices came under pressure Tuesday after the U.S. Energy Information Administration reported total domestic crude oil production would surge to 10 million barrels per day next year, up from the 9.3 million barrels per day expected for the full-year 2017 average.
Later in the day Tuesday, the American Petroleum Institute reported total crude oil stocks declined 5.8 million barrels last week. A survey of industry sentiment from S&P Global Platts earlier this week predicted a draw on U.S. crude oil inventories of 1.8 million barrels
Stephen Brennock, an analyst at London broker PVM, said in a daily emailed newsletter that API metrics could be supportive of a sentiment of a balancing market.
"After a prolonged period of builds into record territory, U.S. crude inventories have finally started to decline," he said.
Strong U.S. crude oil production and a previous policy from members of the Organization of Petroleum Exporting Countries to defend a market share with more oil created a glut and helped push crude oil prices to historic lows last year. Traders are looking for signs of balance to erase last year's pessimism.
The price for Brent crude oil was up 1.2 percent about a half hour before the start of trading in New York to $49.33 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 1.3 percent to $46.47 per barrel.
The early rally will be tested by official data on supplies and inventory levels from the EIA. Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily newsletter that if EIA confirms the substantial draw, it may "be a strong sign that the market is indeed on the road to being in balance."
The short-term market report from earlier this week, however, shows supply-side concerns linger despite the draw on inventory levels. Brennock in his report said the United States may still be "awash in oil" even as storage levels decline.