Oil prices hit their lowest in 11 days on Tuesday on news that U.S. shale oil output in May is expected to post the biggest monthly increase in more than two years, fuelling concerns that U.S. production growth is undermining efforts to cut oversupply.
U.S. government drilling data showed shale production next month was set to rise to 5.19 million barrels per day (bpd), with output from the Permian play, the largest U.S. shale region, expected to reach a record 2.36 million bpd.
Global benchmark Brent crude futures were down 49 cents at $54.87 a barrel at 1038 GMT. They touched $54.76 intraday, the lowest since April 7.
U.S. West Texas Intermediate crude futures traded down 46 cents at $52.19 a barrel. Their intraday low was $52.16, also the weakest since April 7.
"EIA (U.S. Energy Information Administration) estimates for a combined 124,000 barrels-per-day growth in U.S. shale production over May have added another bearish element to the market," wrote analysts at JBC Energy, based in Vienna.
More barrels could be on their way to market from U.S. shale fields as financial companies are investing billions in production, a Reuters analysis showed.
Members of the Organization of the Petroleum Exporting Countries are cutting oil production by 1.2 million bpd from Jan. 1 for six months, the first reduction in eight years.
"The battle between the 'sheiks and the shale oil producers' is far from decided ... with all attempts by OPEC to achieve a lasting production deficit on the oil market being torpedoed by non-OPEC producers – first and foremost the U.S.," analysts at Commerzbank wrote.
The energy minister of OPEC member the United Arab Emirates said on Tuesday he saw healthy oil demand growth this year and believed inventories would fall, but that it would take more time to rebalance the market.
He said "conformity" within OPEC and other producers was improving and that the UAE was complying 100 % with its pledge to cut production.
A preliminary Reuters poll showed analysts expected U.S. crude stocks to have fallen in the week to April 14, building on a surprise decline the previous week.
Analysts said they expected crude oil inventories to have fallen by around 1.5 million barrels last week.
Inventory data is scheduled for release by the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT) on Tuesday, followed by the official EIA report at 10:30 a.m. EDT (1430 GMT) on Wednesday.