Market Watch, 20 Oct. 2016- Oil prices edged lower in early Asia trade Thursday, as investors cashed in their overnight gains driven by a larger-than-expected decline in the U.S. crude inventory.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in November CLX6, -0.43%   traded at $51.61 a barrel, down $0.20, or 0.4%, in the Globex electronic session. December Brent crude LCOZ6, -0.28%  in London’s ICE Futures exchange fell $0.15, or 0.3%, to $52.52 a barrel.
Oil prices shot up overnight to a more than one-year high after Energy Information Administration data showed U.S. domestic crude stocks dropped by 5.2 million barrels in the week ended Oct. 14. The contraction exceeded many analysts’ expectations who anticipated a smaller draw or an increase.

The decrease was largely due to lower imports, said S&P Global Platts.
However, with total crude stocks at 468.7 million barrels, it is still 5.4% higher than the same period last year and 31.5% above the five-year average.
“So the market is far from tight, but it does look tighter than a week ago, said Tim Evans, a Citi Futures analyst.
That said, the fact that U.S. stockpiles are draining at a time they usually grow is encouraging for bullish traders. The latest draw in crude was large enough to overcome an addition to gasoline stockpiles, and the total amount of all oil and refined products in storage fell by 3.6 million barrels. That total inventory–at 1.3 billion barrels–is now down 2.4% since the end of August, the largest drop over a seven-week span since February 2014, according to EIA figures.
The flexibility and speed of the U.S. productions have greatly changed the dynamic of the global oil market. The emergence of U.S. shale oil is threatening producers from the Middle East and Russia who have been pumping at record levels to protect their market shares.
As a result, prices have been in a prolonged funk for over two years and producers who can’t afford to keep operating at such low prices have either dropped out or scaled back.
The low prices have also prompted the Organization of the Petroleum Exporting Countries to suggest a collective production cut of 200,000 to 700,000 barrels a day for its members. The plan, which so far excludes Iran, Libya, and Nigeria, is expected to be discussed and possibly ratified in the Nov. 30 meeting.
Many market watchers aren’t enthused by the deal, saying the group’s longstanding internal tensions will make it difficult for all members to be on board. Even if a deal is struck, it remains a question if the members would obey to the production quotas.
“Despite skepticism on the OPEC deal, since it was announced, oil market participants have clearly become less bearish and more bullish, as evidenced by increasing managed money net length and the options market,” said Michael Wittner, head of oil market research at Societe Generale.
Nymex reformulated gasoline blendstock for November RBX6, -0.14% — the benchmark gasoline contract — fell three points to $1.5133 a gallon, while November diesel traded at $1.5836, 43 points lower.
ICE gasoil for November changed hands at $469.50 a metric ton, down $3.75 from Wednesday’s settlement.