Oil Prices Resume Slide amid OPEC Uncertainty
Crude oil was back on the defensive Wednesday, as rising U.S. inventories and uncertainty about OPEC production cuts undermined a modest recovery effort earlier in the week.
The West Texas Intermediate (WTI) benchmark for U.S. crude futures fell 79 cents, or 1.5%, to $50.77 a barrel on the New York Mercantile Exchange. Prices reached a settlement low of $50.42 a barrel on Nov. 23.
London-traded Brent crude futures were down $1.06, or 1.7%, at $59.15 a barrel. The global benchmark bottomed at $58.80 a barrel last week.
A stronger dollar was also pressuring commodity markets on Wednesday, as the greenback eyed fresh yearly highs against a basket of major rivals. The DXY dollar index gained 0.1% to 97.47.
Data from the American Petroleum Institute (API) late Tuesday showed a hefty rise in commercial crude inventories. The industry association said stockpiles expanded by 3.5 million barrels last week, underscoring weaker demand domestically. Higher inventory levels usually place downward pressure on prices.
On Wednesday, the U.S. Energy Information Administration (EIA) reported an inventory build of 3.577 million for the week ended Nov. 23, far greater than the 769,000 increase expected. Inventories jumped by 4.851 million barrels the week before.
OPEC Meeting Eyed
The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to meet early next month to determine whether a reduction in crude output is warranted following the latest market correction. Saudi Arabia, OPEC’s de-facto head, said on Wednesday it would not lower output without the support of its fellow cartel members.
According to analysts, production cuts of 1.4 million barrels per day are likely to be announced following the meeting in Vienna on Dec. 6. However, it’s not entirely clear whether the Saudis will announce fresh output cuts or simply revert back to previous production quotas. As Hacked reported Nov. 13, Saudi Arabia has already cut output levels by 500,000 barrels per day in light of the recent price collapse. The shift in policy was heavily scrutinized by U.S. President Donald Trump, who warned the cartel against manipulating another price surge.
Oil prices were trading at four-year highs in early October but a deteriorating global demand outlook coupled with rising U.S. production have erased those gains. Crude is now in a protracted bear market. OPEC’s announcement on Dec. 6 is likely to boost prices, though the duration of the rally is subject to debate. However, analysts generally agree that the cartel must reduce output substantially to have any chance of re-balancing the market in early 2019.
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