Oil down 1% on Opec worry, offsetting US inventory fall

Traders remain cautious of the Opec's ability to cut production come late November

Oil settled down more than 1 per cent on Wednesday even after a surprise drawdown in US crude inventories, as traders remained cautious that the Organization of the Petroleum Exporting Countries (Opec) would be able to cut production come late November.

US crude stockpiles fell 553,000 barrels last week, the US Energy Information Administration (EIA) said, compared with the 1.7 million-barrel build analysts polled by Reuters forecast.

Crude inventories in the world's largest oil producer have fallen unexpectedly in seven of the past eight weeks, bucking the usual autumn trend in which stockpiles rise as refineries go into maintenance season.

 

Oil prices pared losses after the EIA data, with US crude briefly trading in positive territory and Brent returning above $50 a barrel. But the rebound was limited by doubts about whether the Opec, which meets November 30 in Vienna, will succeed in its planned production cut.

"The focus point from here remains on the Opec meeting that comes a month from now, with Iran, Libya and Nigeria, all looking unlikely to commit to output cuts," said Tariq Zahir, crude trader and fund manager at Tyche Capital Advisors in New York.

Prices will likely continue falling, with US West Texas Intermediate (WTI) hitting $47 and Brent falling to $48 to $48.50 by the month's end as the market grows sceptical about the Opec's jawboning, said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.

"We've seen bullish information," he said of the optimistic comments from some producers on the Opec's planned production cut. "None of it is really new, so it's one of those things when the buyers are exhausted."

Brent crude was down 81 cents, or 1.6 per cent, at $49.98 a barrel. It fell as low as $49.65, its lowest since September 30.

US WTI crude slid 78 cents, or 1.6 per cent, to $49.18. Its session low was $48.87, its lowest since October 4.

Iran, Libya, Nigeria and Venezuela are expected to be exempted from the Opec's planned production cut, which seeks to cut about 700,000 barrels per day (bpd) from an estimated glut of 1.0 million to 1.5 million bpd.

Iraq has said it would not participate, while Indonesia's state oil firm is targeting an output increase.

Unless non-member Russia joins, the onus of a potential cut would fall on Saudi Arabia, Kuwait and the United Arab Emirates.