July 20 (UPI) -- Declining productivity in one of the premiere U.S. shale basins and geopolitical tensions in the Middle East gave a lift to oil prices early Thursday.
The price for Brent crude oil, the global benchmark, was trading above $50 per barrel for the first time in more than a month in early Thursday trading. Crude oil prices have been in rally mode during the last few sessions on signs that some of the supply-side strains that were keeping oil prices in the mid $40 range through June were starting to ease.
The U.S. Energy Information Administration reported that productivity in the Permian shale basin in the southern United States was on pace to decline for the 10th month in a row. The EIA said operators are drilling wells, but not completing them, a process used to prep it for production.
"When operators drill a well but do not complete it, the inventory of drilled but uncompleted wells increases, which tends to lower output per drilling rig," EIA explained. "Oil flows only after a well is completed."
Still, the Permian region is expected to represent about 30 percent of total U.S. crude oil production next year. The EIA said in its lately monthly market report, released last week, that total U.S. crude oil production in 2018 would be about 9.9 million barrels per day, a downward revision of about 100,000 barrels per day from its last estimate.
That follow a report that total commercial stocks in the United States declined more than 10 million barrels last week, suggesting a market rebalancing is under way.
A morning market report from London oil broker PVM said there are no guarantees recent trends on petroleum product levels in the United States will continue, and some inventory levels are still in surplus. Next week, parties to a production agreement steered by the Organization of Petroleum Exporting Countries meet to review its impacts.
"It remains to be seen if it means further and deeper cuts in oil output but volatility is guaranteed on Monday when the meeting takes place," analyst Tamas Varga wrote in the report.
Meanwhile, divisions among the governments of many Persian Gulf nations are rattling investor's nerves. Ongoing disputes with Qatar have ensnared several OPEC members and deepened the rifts between Sunni and Shiite nations.
Kuwait, which is predominately Sunni, said Thursday it closed down an Iranian culture mission and asked for a reduction in the number of Iranian diplomats operating at the embassy. The issue, according to the official Kuwait News Agency, is related to terrorism.
The row could complicate discussions next week on the OPEC-led effort to balance the markets.