Oil prices pared early gains on Thursday despite US industry data showing a big drop in crude stocks last week, with investors sceptical that OPEC-led cuts will be enough to rebalance an oversupplied market.
Reaction to the U.S. employment data could be significant for oil prices if the data is substantially away from consensus expectations of an increase around 180,000, although position adjustment into the weekend is likely to be a more important market factor.
The global oil market reacted Wednesday to the news that Libya, one of the major oil producers in the Organization of Petroleum Exporting Countries (OPEC), was increasing its crude output to 827,000 barrels per day.
Libya and Nigeria are the two OPEC nations exempted from the production cut deal.
"Now that U.S. President Trump has announced that the U.S. will be withdrawing from the Paris Climate Agreement, it is expected that the U.S. will expand its oil production even more sharply", said analysts at German bank Commerzbank.
Crude inventories fell 6.4 million barrels (bbl) in the week to May 26, far more than analysts' expectations for a decrease of 2.5 million bbl.
"Why wouldn't they ramp up production when producers like the USA have an open invite to do as they please?" he said.More news: Huddersfield promoted to Premier League after Play-Off penalty drama
The bad news is US crude production rose to 9.34 million bpd last week, up almost 500,000 bpd from a year ago.
Oil markets edged higher on Monday as rising Saudi physical prices and signs of falling OPEC supplies slightly outweighed a persistent rise in United States production.
Oilfield services firm Baker Hughes on Friday reported its weekly count of oil rigs rose for a 20th straight week.
On Wednesday, they fell $1.53, or 3 percent, to settle at $50.31 a barrel on their last day as the front-month contract. But production is still half the 1.60 million bpd Libya pumped before the 2011 civil war. Pressuring the market through $47.44 will put the market in a bearish position.
US producers aren't part of the output agreement.
As a nervous and impatient market is forced to pick the victor between the 1.8 million b/d of OPEC/non-OPEC cuts in force until March 2018 and the rise in United States production underway, even before the full impact of either has been felt, trade has become increasingly sentiment-driven, with the view swinging to the bearish end in recent weeks.
While there was a dip in OPEC supplies between February and April, a report on Monday by Thomson Reuters Oil Research said OPEC shipments likely jumped to 25.18 million bpd in May, up over 1 million bpd from April.