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Oil prices tread water as ongoing supply glut is met by firm demand

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FILE PHOTO An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S. on May 3, 2017.
FILE PHOTO An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S. on May 3, 2017.

SINGAPORE (Reuters)JULY 18, 2017 - Oil markets were treading water on Tuesday, supported by firm demand but weighed down by ongoing high supplies from producer club OPEC and also the United States.

Brent crude futures, the international benchmark for oil prices, were at $48.39 per barrel at 0634 GMT, down 3 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 4 cents at $45.98 per barrel.

"We're stuck in a range that, I think, will be tough to break out of without some kind of political factor coming into play," said Matt Stanley, fuel broker at Freight Investor Services (FIS).

In a sign of strong demand, data on Monday showed refineries in China increased crude throughput in June to the second highest on record.

Despite this, oil markets have struggled with oversupply since 2014, resulting in a more than 50 percent fall in prices since then.

A deal by the Organization of the Petroleum Exporting Countries with Russia and other non-OPEC producers to cut supplies by around 1.8 million barrels per day (bpd) between January this year and March 2018 has so far not led to the tighter market and higher prices that producers have hoped for.

That's because supplies from within OPEC remain high largely due to rising output from Nigeria and Libya, two OPEC states exempt from the pact, and increasing U.S. production.

Ecuador, a small producer within OPEC, also said on Tuesday that it was not complying with its production cut of 26,000 bpd due to the country's fiscal deficit which is expected to hit 7.5 percent of GDP this year.

Oil Minister Carlos Perez said that Ecuador was only cutting some 60 percent of that figure, putting current output at 545,000 bpd.

"We are not meeting the quota imposed on us because of the obvious needs the country has," Perez said.

Traders said that a key price indicator would be the release of U.S. fuel storage data by the American Petroleum Institute (API) later on Tuesday, and from the U.S. Energy Information Administration (EIA) on Wednesday.