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US crude falls 2%, settling at $48.59, failing to hold above the $50 level

Oil prices fell on Thursday, on concerns of lingering global oversupply as Russia considered a future output resumption and OPEC boosted its July production numbers.

Russian oil producer Gazprom Neft considers it "economically feasible" to resume production in mature fields after a global agreement among OPEC and non-OPEC expires, a representative of the company said.

Brent crude, the global benchmark, was up 86 cents, or .16 percent, at $51.85 at 2:32 p.m. ET (1646 GMT), after striking an 11-week high at $53.64. U.S. West Texas Intermediate (WTI) crude ended Thursday's session down 97 cents, or 2 percent, to $48.59, after briefly jumping above $50 a barrel.

OPEC on Thursday raised its outlook for oil demand in 2018 and cut its forecasts for output from rivals next year, although another increase in the group's production suggested the market will remain in surplus despite efforts to limit supply.

OPEC said its oil output rose by 173,000 bpd in July to 32.87 million bpd, led by the exempt producers plus top exporter Saudi Arabia, citing figures it collects from secondary sources.

U.S. crude futures are down about 9 percent so far this year, suppressed in large part by concern that OPEC and its partners may not be able to force global oil inventories to drop by cutting production.

Saudi Arabia said on Tuesday it would cut supplies to most buyers in Asia — the world's biggest oil-consuming region — by up to 10 percent in September.

In a sign that investors are turning more optimistic about the pace at which oil supply and demand are rebalancing, prices for crude for prompt delivery are trading above those for delivery further in the future.

"This is the march toward the flattening of the curve," said SEB chief commodity strategist Bjarne Schieldrop.

"The major event now going forward is the Middle East and Asian refineries rushing back into operation and consuming more crude, just as Saudi Arabia says it will cut September deliveries to Asia," he said.

The physical market is also showing signs of stronger near-term demand, after having suffered from a persistent overhang of unused crude.

Prices for prompt deliveries of North Sea crude oil are at their smallest discount to future prices in nearly two years, and a surplus of oil stored on ships is gradually dissipating, having hit two-year highs.

Global stocks remain above their longer-term averages and with the U.S. summer driving season nearly at an end, investors are well aware that the attempts by OPEC, Russia and other producers to boost prices may bring unwanted side-effects.

"The minute OPEC try to raise prices by cutting production, U.S. producers will react accordingly to fill the void. This results in a tug of war that we have witnessed all year and the final outcome is a range-bound market," said Matt Stanley, a commodities broker at Freight Investor Services in Dubai.

Inventories in the United States are at their lowest since October, having fallen for 10 of the last 12 weeks.

While prices rose on Wednesday after the lower U.S. inventory numbers, Gene McGillian, manager of market research at Tradition Energy, said that information was not enough to sustain a rally.

"It seems like the market wants to go higher," he said, "The market is searching for it, the question is will it get it."