Among the other favorable factors were chances of an extension in the Saudi-led OPEC output cut deal and geopolitical tensions as well as news of a drop in USA oil inventory. "If sanctions are imposed on Iran, most OPEC producers would like to pump more oil, especially given higher prices", the market strategist of CMC Markets, Michael McCarthy said.
Brent crude futures fell US$1.01 to settle at US$78.79 a barrel, a 1.27 per cent loss. Meanwhile Pierre Andurand, one of the most prominent hedge fund managers in the oil market, recently said that $300 a barrel was "not impossible".
The increase in USA inventories came from a combination of reduced exports and rising imports; the latter is somewhat surprising, Flynn said, because Brent crude is currently trading at a $7 premium to us crude, making exports more advantageous right now.
Before the EIA report, benchmark West Texas Intermediate (WTI) crude for July delivery traded down about 0.2% at around $72.01 a barrel, and it dropped to around $71.30 (down about 1.2%) shortly after the report's release.
Elsewhere, Libya, which is an OPEC member, cut its oil production by about 120,000 barrels per day as unusually hot weather prompted power problems, an official from the National Oil Corp said on Wednesday. Data was also published showing a sharp rise in American stockpiles. USA refineries produced about 10 million barrels of gasoline a day last week, down by about 500,000 barrels compared to the prior week.
"Recent flow is suggesting short-term traders are looking to sell the $80 per barrel chart-toppers anticipating a possible compliance shift within the OPEC-Non Opec supply agreement", he added in a note on Thursday.
The oil group is scheduled to meet with top non-OPEC producers in Vienna June 22, but sources told Reuters that Saudi Energy Minister Khalid al-Falih is scheduled to meet with officials from Russian Federation and the United Arab Emirates this week to discuss increasing production. So, for the working week that ended on May 18, the country's oil reserves fell by 1.3 million barrels.
The United States Oil ETF (NYSEARCA: USO) traded down about 0.9% to $14.43, in a 52-week range of $8.65 to $14.74. Because most of the participating nations are already producing close to their maximum, additional supply would have to come from a relatively short list of nations, namely, Saudi Arabia, Russia, the UAE and Kuwait. Exports fell 818,000 bpd last week to 1.7 million bpd, after reaching a weekly record of 2.6 million bpd in the previous week.