Oil prices ease on doubts OPEC output cut will end global glut

Oil prices
Oil prices fell slightly in Wednesday trading. Analysts are taking a wait-and-see attitude to the OPEC supply cut deal. Statoil photo by Ole Jørgen Bratland.

Oil prices slip in trading on Wednesday

 By Scott DiSavino

NEW YORK, Dec 7 (Reuters) – Oil prices eased on Wednesday on bearish U.S. petroleum inventory data and doubts that production cuts promised by OPEC and Russia would be deep enough to end a supply overhang that has weighed on markets for more than two years.

Brent futures were down 46 cents, or 0.9 per cent, at $53.47 a barrel by 11:19 a.m. EST (1619 GMT). U.S. crude fell 59 cents, or 1.2 per cent, to $50.34 per barrel.

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The U.S. Energy Information Administration EIA said crude inventories fell 2.4 million barrels during the week ended Dec. 2, which was more than the 1 million-barrel draw analysts forecast in a Reuters poll.

Stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures, however, increased by a hefty 3.8 million barrels last week, the most since 2009, the data showed.

“The report was bearish despite the overall crude oil drawdown,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York, noting increases in refined products inventories.

Before the EIA released its report, the market was already lower, with Brent down 0.6 per cent and U.S. crude down 1.1 per cent, on doubts the output cuts announced by the Organization of the Petroleum Exporting Countries last week would be enough to rebalance the market.

Oil prices surged almost 20 percent after OPEC and Russia announced last week that they would cut production next year in an effort to prop up markets.

Since the deal was announced, OPEC and Russia have reported record production and output elsewhere is also resilient.

The EIA said on Tuesday it expected U.S. crude oil production for 2016 and 2017 to fall by less than previously expected.

OPEC and non-OPEC oil producers meet this weekend in Vienna to agree details of the output cut, which targets an overall reduction of around 1.5 million barrels per day (b/d).

OPEC member Nigeria, exempt from the cuts, said on Wednesday it hoped to boost its oilproduction to 2.1 million b/d in January, up from 1.9 million b/d now.

Despite widespread scepticism, many analysts say 2017 will likely see a more balanced oilmarket.

Oil markets are on track to tighten over 2017, which will be accelerated by OPEC’s decision to reduce production alongside non-OPEC countries,” said BMI Research. “If effectively implemented, we expect the global oil market will return to balance in Q1 2017.”

Oil production has been outpacing consumption by 1 to 2 million b/d since late 2014.

(Additional reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Jason Neely)

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