Mubasher: Oil prices dropped on Thursday after US crude inventories hit their highest level since December 2017 amid worries over an emerging global glut, but an expected supply cut by the Organization of Petroleum Exporting Countries (OPEC) undermined further declines.

By 5:34 am GMT, US West Texas Intermediate (WTI) crude futures fell 0.5% to $54.35 per barrel (pb), while Brent crude oil futures registered $63.25 pb, down 23% from their last settlement.

US commercial crude oil inventories rose by 4.9 million barrels to 446.91 million barrels in the previous week, touching their highest level since December 2017, the Energy Information Administration (EIA) said in a report on Wednesday.

US crude oil production remained at a record level of 11.7 million barrels per day (bpd), the EIA said.

Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said that US inventory data maintained showing “significant supply builds, which comes on the back of sustained record US crude oil production,” Reuters reported.

In spite of high global production, some analysts warned that oil markets have little spare capacity to handle unexpected supply disruptions.

Innes noted that once US pipeline bottlenecks were lessened, “the entire notion of a tight global spare capacity argument goes down the well”.

The Middle East-dominated producer group OPEC is concerned about the appearance of a supply glut that could further weigh on prices.

In a bid to face that, OPEC is weighing up supply reduction in its next meeting on 6 December in Vienna.

“While there is talk that OPEC plus Russia may again agree to a production cut, the concern is that not all relevant parties will be able to come to an agreement,” William O’Loughlin, investment analyst at Australia’s Rivkin Securities, told Reuters.

He added that the OPEC kingpin nation has “hinted at a unilateral cut, but it will want to be careful about annoying the US given that President Trump has been vocal about his desire for lower oil prices.”

By 6:45 am GMT, US Nymex crude futures fell 0.15% to $54.55 pb, while global benchmark Brent futures dipped 0.20% to $63.35 pb.