Oil weak as OPEC aims to offset rising US output
LONDON (Reuters) — Oil prices fell on Wednesday, pulled down by caution that rising US crude output could scupper a rally that lasted for most of the third quarter.
US West Texas Intermediate crude futures were at $50.40 per barrel at 1315 GMT, down 2 cents from their last close. They fell below $50 earlier in the session.
Brent crude futures were down 4 cents at $55.96 a barrel. Earlier in the day, they fell as low as $55.38.
The drop came amid worries that a third-quarter rally that lifted Brent to mid-2015 highs by late September had been overdone. A resumption in output at Libya's Sharara oilfield added to the concerns.
"Fundamentals may not yet be strong enough to support a continued rally, especially in growth-dependent commodities such as oil," Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, said in a quarterly outlook to investors.
The Sharara oilfield restarted on Wednesday. It had been producing more than 230,000 bpd before armed brigades closed it on Sunday.
Still, market observers said a so-called rebalancing is well underway, meaning demand is no longer undershooting available supply.
The rebalancing is a result of strong consumption and also efforts led by the Organization of the Petroleum Exporting Countries to cut output by around 1.8 MMbpd in 2017 and the first quarter of next year.
On Wednesday OPEC Secretary-General Mohammad Barkindo said he was confident that his organization could restore sustainable stability to markets, while Russian President Vladimir Putin said he did not exclude an extension of the cuts until the end of 2018. Russia is part of the supply agreement.
But rising oil production in the United States, which is not involved in the deal, has prevented prices from climbing further.
"The production growth from non-OPEC countries is still there so I do not expect a price rise in the near future," Fatih Birol, executive director of the International Energy Agency, told Reuters.
US output hit 9.55 MMbpd in late September, its highest level since July 2017, and drillers added six oil rigs in the week to Sept. 29, according to energy services firm Baker Hughes.
Data on Tuesday from the US American Petroleum Institute showed gasoline stocks rising last week by a larger-than-expected 4.9 MMbbl, with crude stocks dropping by 4.1 MMbbl.
Fuel inventory data from the US Energy Information Administration is due later on Wednesday.
Reporting by Libby George; Additional reporting by Henning Gloystein in Singapore and Ron Bousso in London; Editing by Dale Hudson and Louiae Heavens
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