Oil prices settle flat after testing three-week lows

Oil prices settle flat after testing three-week lows

EIA expects a rise of 117,000 barrels in September U.S. shale oil output.

The American Petroleum Institute will issue its weekly USA oil inventory data at 4:30 p.m. EDT, ahead of the US government's official report on Wednesday.

Oil likely saw "some value buying moving into the market", Robbie Fraser, commodity analyst at Schneider Electric, told MarketWatch as prices pared earlier losses. Analysts expect a drop of 3.176 million in crude stocks in the USA last week, and a 1.527 million decline in gasoline inventories with distillate supplies down by 620,000 barrels.

Brent and USA crude reached two-month highs in early August but have slid over the last few days, dropping more than 2.5 percent on Monday.

US crude inventories probably shrank by 3.5 MMbbl last week, according to the Bloomberg survey.

A total of 1.9 million barrels of both USA crude grades will be shipped by the end of October.

The U.S. West Texas Intermediate crude September contract eased 0.04% to $48.80 a barrel.

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"The market took this as a mildly bullish report", said William O'Loughlin of Australia's Rivkin Securities.

Gasoline inventories rose by 301,000 barrels for the week ending August 11, compared to analyst expectations that inventories for the fuel would fall by 1.5 million barrels. Phil Flynn, senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter the leveling effect may be overstated because production growth isn't keeping up with demand.

Libyan production has surged in the past year, surpassing 1 million bpd at the end of June for the first time since 2013, but output remains vulnerable to local protests.

Last week, the EIA reported a draw in USA commercial crude oil inventories of 6.5 million barrels for the week to August 4, but on a more troubling note, the EIA calculated gasoline inventories had gone up by 3.4 million barrels, with daily production averaging 10.3 million barrels, basically flat on the previous week, when refineries processed some 17.4 million barrels of crude daily.

"Opec and Russian Federation still face an uphill battle in reducing the global supply surplus in the face of growth in output elsewhere (US shale oil, Libya, Nigeria) and less than compliant behaviour in their midst (Iraq, United Arab Emirates)", French bank BNP Paribas said in a note. Crude supplies at Cushing, Okla., the delivery point for WTI and the biggest US oil-storage hub, rose 700,000 bbl last week, according to a Bloomberg-compiled forecast. The compliance outside the OPEC is even worse at just 67 percent.

The industry-funded American Petroleum Institute will release its inventory data later on Tuesday. On the demand side, analysts also see a gradual slowdown in consumption growth as petrol demand peaks in the U.S. due to improving fuel efficiency and the rise of electric vehicles, while China's voracious oil thirst also starts to taper off.

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