Oil falls on rising US inventories as Opec talks of supply cuts

London —  Oil prices fell on Thursday after US crude inventories swelled to their highest level since December stoking concerns about a global glut, but oil cartel Opec talk of an output reduction limited losses.

Benchmark Brent fell 67c to $62.82 a barrel by 9.04am GMT, after dropping by as much as $1 earlier in the session. US West Texas Intermediate (WTI) fell more than a $1 before easing back to trade down 79c at $53.84.

US commercial crude oil inventories climbed by 4.9-million barrels to 446.91-million barrels last week, the US Energy Information Administration (EIA) said on Wednesday, its highest level since December. US crude oil production also stayed at a record 11.7-million barrels per day (bpd), the EIA said.

Tamas Varga, analyst at PVM brokerage, said the market trend was “still bearish”. “The question is what Opec will do in December: will they cut, and if so, by how much?” he said.

Opec is worried about the emergence of a glut that could pull prices down further, but Opec’s biggest exporter, Saudi Arabia, is also under US pressure to prevent prices spiking higher again.

“Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy!… Thank you to Saudi Arabia, but let’s go lower!” US President Donald Trump tweeted on Wednesday.

The oil market has also been weighed down by weak Asian markets as investors fret about slowing global growth in the face of rising US interest rates and trade tensions.

Trading is expected to remain muted until Monday due to Thursday’s Thanksgiving holiday in the US.

More US crude could also be heading to market as the U.S. pipeline bottlenecks are cleared in the second half of 2019. The increase in US oil output has outpaced capacity to transport the additional crude.

To counter the surge in supply, Opec is considering a deal to cut production when it meets on December 6, although Opec  member Iran is expected to resist any voluntary reduction. Russia, an ally of Opec, has also shown no sign it would partake in any cut.

Said William O’Loughlin, investment analyst at Australia’s Rivkin Securities, “While there is talk that Opec plus Russia may, again, agree to a production cut, the concern is that not all relevant parties will be able to come to an agreement.” 

Reuters