Jan. 31 (UPI) -- Emerging supply-side strains from the United States, and the announcement Wednesday of new discoveries, sent oil prices lower in early Wednesday trading.
Crude oil prices lost a grip on the $70 per barrel ceiling touched during a January rally that saw markets surge by more than 4 percent over a few short trading days. The price for oil started pulling back on Monday on signs North American oil producers were taking advantage of the run.
In his first State of the Union address Tuesday night, U.S. President Donald Trump reiterated his strong support for a vibrant oil and gas sector, hinting at the move of U.S. oil on the global market by declaring his country is "now very proudly an exporter of energy to the world."
Analysts at UBS said compliance with a move by the Organization of Petroleum Exporting Countries to stem production, general global economic momentum and geopolitical risk had supported crude oil prices since the middle of last year.
"But we believe the first negative signs are emerging from U.S. shale producers, due to their relatively short lead times, about the potential overshooting of oil prices," the emailed report read. "In particular, the number of horizontal oil rigs in the Permian shale basin, where most of the U.S. crude supply growth is expected to come from, has risen quickly in recent weeks."
Late Tuesday, the American Petroleum Institute reported U.S. crude oil inventories increased by more than 3 million barrels last week, well above the estimate from commodity pricing group S&P Global Platts of a gain of 325,000 barrels.
A market tilted heavily toward the supply side eventually pushed oil prices below $30 per barrel in early 2016 and the shale response is in part behind the recent pull away from $70 per barrel.
The price of Brent crude oil was down 0.28 percent to $68.32 per barrel as of 9:20 a.m. EST. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.29 percent to $64.31 per barrel.
Official data on crude oil inventories in the world's largest economy are due about an hour after the market opens and will influence the price direction for the rest of the trading session Wednesday and into Thursday morning. Traders will also be watching for word from U.S. Federal Reserve Chair Janet Yellen on a possible rate direction. That would influence the value of the U.S. dollar, which can have an inverse relationship with the price of oil.
"If the Fed comes off a little more hawkish than feared then we could see a dollar spike and a commodity and oil sell-off," Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in an emailed report.
On Wednesday, British energy company BP announced it made two new oil discoveries in the North Sea. In the United States, Chevron and French supermajor Total declared a new find in the U.S. Gulf of Mexico, which Total said was its largest regional find to date.