Oil falls as high in­ven­to­ries out­weigh likely OPEC cuts

Business a.m. - - WORLD BUSINESS & ECONOMY -

OIL PRICES FELL FUR THER on Fri­day as swelling in­ven­to­ries de­pressed sen­ti­ment de­spite wide­spread ex­pec­ta­tions that OPEC and Rus­sia would agree some form of pro­duc­tion cut next week.

The two global oil bench­marks, North Sea Brent LCOc1 and U.S. light crude CLc1, have had their weak­est month for more than 10 years in Novem­ber, los­ing more than 20 per­cent as global sup­ply has out­stripped de­mand.

Brent fell $1.20, or 2.0 per­cent, to a low of $58.31 a bar­rel on Fri­day, be­fore re­cov­er­ing to around $58.50 by 1425 GMT. U.S. light crude fu­tures dropped $1.39, or 2.9 per­cent, to $49.97. Both con­tracts were on course for their eighth con­sec­u­tive week of falls.

Reuters re­ports that surg­ing oil pro­duc­tion in the United States, Rus­sia and by mem­bers of the Mid­dle East­bas dom­i­nated Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries has helped fill global in­ven­to­ries and cre­ate a glut in some mar­kets.

A slow­down in oil de­mand growth is com­pound­ing the emerg­ing over­sup­ply.

At the heart of the malaise are con­cerns that OPEC+ will not do enough to ad­dress the cur­rent over­sup­ply,” said Stephen Bren­nock, an­a­lyst at Lon­don bro­ker­age PVM Oil.

The weak­ness in sen­ti­ment is vis­i­ble in the Brent for­ward price curve, which now has prices for fu­ture de­liv­ery above those for im­me­di­ate dis­patch, a struc­ture known as “con­tango”, which can make it at­trac­tive to put oil into stor­age.

To rein in the glut, OPEC and its main part­ner Rus­sia are dis­cussing sup­ply cuts and are due to meet in Vi­enna on Dec. 6 and 7 to agree pro­duc­tion strat­egy.

A maze of crude oil pipes and valves is pic­tured dur­ing a tour by the De­part­ment of En­ergy at the Strate­gic Petroleum Re­serve in Freeport, Texas, U.S. June 9, 2016.

“The next OPEC meet­ing is go­ing to prove a piv­otal mo­ment for the di­rec­tion of oil prices in 2019,” BNP Par­iPeter strate­gist Harry Tchilin­guirian told Reuters Global Oil Fo­rum.

“A de­ci­sion will have to be made against a back­ground of strong U.S. shale oil sup­ply growth, and for now, weaker ex­pec­ta­tions on global oil de­mand growth.”

Be­fore the OPEC meet­ing, the world’s top three pro­duc­ers - the United States, Rus­sia and Saudi Ara­bia - will be part of a meet­ing this week­end of the Group of 20 in­dus­tri­al­ized na­tions in Buenos Aires, Ar­gentina.

Oil in­ven­to­ries are ris­ing fast in the United States, where com­mer­cial crude stocks C-STK-T-EIA rose by 3.6 mil­lion bar­rels in the week to Nov. 23 to 450.49 mil­lion bar­rels, ac­cord­ing to the En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA).

Crude re­serves in­creased 6.4 bil­lion bar­rels, or 19.5 per­cent, to 39.2 bil­lion bar­rels at year-end 2017, marginally higher than the pre­vi­ous record of 39 bil­lion bar­rels set in 1970, the EIA sai

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