Oil halted gains below $50 a barrel as investors weighed falling U.S. stockpiles against speculation the recent price rally will encourage producers to raise output.
Futures declined as much as 0.8 percent after advancing 2.3 percent Wednesday to the highest close in more than three months. U.S. crude stockpiles last week fell below 500 million barrels for the first time since January, according to government data. The market is set to remain oversupplied in 2017 and prices will stall at $55 a barrel as shale drillers get back to work, Goldman Sachs Group Inc.’s head of commodities research Jeff Currie said in an interview.
Oil has gained about 11 percent since the Organization of Petroleum Exporting Countries agreed last week to cut production for the first time in eight years. OPEC, which pumped at a record in September, will decide on quotas at an official meeting of the group in Vienna on Nov. 30. Hurricane Matthew is expected to intensify as it approaches the U.S. East coast.
“There is a bit of a cap for oil at about $50 because above that level, once we head up toward $55 a barrel, there’s concerns that U.S. shale producers will jump back into action,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. “The positive momentum has brought oil prices back to the top of the trading range.”
West Texas Intermediate for November delivery lost as much as 38 cents to $49.45 a barrel on the New York Mercantile Exchange and was at $49.56 at 1:54 p.m. in Hong Kong. The contract increased $1.14 to $49.83 on Wednesday, the highest close since June 29. Total volume traded was about 37 percent below the 100-day average. Prices rose 7.9 percent last month.
Global Glut
Brent for December settlement lost as much as 37 cents, or 0.7 percent, to $51.49 a barrel on the London-based ICE Futures Europe exchange. The contract gained 2 percent to $51.86 on Wednesday, the highest close since June 9. The global benchmark traded at a $1.50 premium to WTI for December.
For a story on how the OPEC deal will impact Saudi Arabia, click here.
U.S. crude stockpiles dropped by 2.98 million barrels for a fifth weekly decline, the Energy Information Administration reported Wednesday. A Bloomberg survey had forecast a supply gain. Crude production declined for a second week to 8.5 million barrels a day.
Oil-market news:
Global oil markets are set to remain very oversupplied amid the return of disrupted output in Nigeria and Libya, resilient U.S. shale production and the start of major projects commissioned over the past 10 years, Goldman’s Currie said in a Bloomberg television interview. OPEC members will meet next week for talks on implementing an output cut deal, with Russia joining to discuss how producers from outside the group can participate in the plan, according to Venezuela’s oil minister.
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