Oil falls 2 percent, weighed by ample OPEC supply

    Oil dropped about 2 percent from a two-month high on Tuesday as major world oil producers kept pumping out supply, causing investors to worry that several weeks of steady gains had pushed the rally too far, too fast.
    Selling picked up in the late morning as oil broke below Monday's lows, with more than 925,000 U.S. futures contracts traded, making it the busiest day in the market in nearly three weeks.
    OPEC production rose in July, a Reuters survey found Monday, despite a deal to cut output. That prompted selling after U.S. oil futures had risen more than 16 percent since late June.
    "It seems to be more technical and a combination of that and the OPEC story has everybody running for exits at the same time," said Phil Flynn, analyst at Price Futures Group in Chicago.
    U.S. inventory reports due on Tuesday and Wednesday are expected to show crude stocks fell by 2.9 million barrels last week, the fifth straight week of declines.
    Brent crude LCOc1, the international benchmark, settled down 94 cents, or 1.8 percent, to $51.78 a barrel, while U.S. crude CLc1 ended down $1.01, or 2 percent, to $49.16 a barrel.
    "Momentum indicators have us in overbought territory over the last few days, which is telling you (oil) is going to pull back somewhat," said Robert Yawger, director of energy futures at Mizuho Americas.
    Gasoline and heating oil crack spreads were stronger on Tuesday after Royal Dutch Shell (RDSa.L) said its Pernis refinery in the Netherlands, Europe's largest oil refinery, will remain closed through mid-August following a fire.
    Industry group the American Petroleum Institute (API) reports data on U.S. inventories at 4:30 p.m. EDT (2030 GMT). The U.S. government's official data is out on Wednesday.
    On the demand side, forecasters including the International Energy Agency have been raising their estimates.
    Oil company BP said Tuesday it sees demand growing by 1.4 to 1.5 million barrels per day (bpd).
    The Organization of the Petroleum Exporting Countries, along with Russia and other non-members have agreed to reduce output by 1.8 million bpd from Jan. 1, 2017 until March next year to get rid of excess supply.
    Oil output by OPEC rose last month by 90,000 bpd to a 2017 high, led by Libya, one of the exempt producers.
    Oil prices fell 1 percent on Wednesday, with rising U.S. fuel inventories pulling U.S. crude back below $50 per barrel, while ongoing high supplies from producer club OPEC weighed on international prices.
    U.S. West Texas Intermediate (WTI) crude futures were at $48.68 per barrel at 0303 GMT, down 48 cents, or 1 percent, from their last settlement. That came after the contract opened above $50 for the first time since May 25 on Tuesday.
    Brent crude futures, the international benchmark for oil prices, were down 47 cents - almost 1 percent - at $51.31 per barrel.
    "The coup de grace came from the American Petroleum Institute's (API) Crude Inventory release late in the New York session...bringing an end to the last few weeks' trend of falling supplies in storage," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
    "Traders stampeded for the door to lock in profits from the last eight days' bull-run," he added.
    The API said that U.S. crude stocks rose by 1.8 million barrels in the week ending July 28 to 488.8 million, hitting hopes that recent inventory draws were a sign of a tightening U.S. market.
    Official storage figures are due to be published by the U.S. Energy Information Administration (EIA) late on Wednesday.
    Outside the United States, prices were pegged back by a survey this week that showed production by the Organization of the Petroleum Exporting Countries (OPEC) hit a 2017 high of 33 million barrels per day (bpd) - despite its pledge to restrict output together with other OPEC producers, including Russia, by 1.8 million bpd between January this year and March 2018.
    Because of rising output, energy consultancy Douglas Westwood said oversupply would return soon, and last for years.
    "Oversupply will actually return in 2018. This is due to the start-up of fields sanctioned prior to the downturn," said Steve Robertson, head of research for the firm's Global Oilfield Services. "This is in addition to the production gains through increased investment and activity in the U.S. unconventional (shale) space."
    Douglas Westwood said it expected oversupply to last until 2021.
    Robertson said that "external factors such as major interruptions to supply from political or weather-related events can shift the balance quickly".
    But he warned that "any expectations of recovery based upon optimism or wishful thinking along 'it always bounces back' should be tempered by a reality check, and the very real possibility that the current recovery could take much longer to materialise".
    Reported by David Gaffen, Henning Gloystein for Reuters.