Oil Prices Fall on Oversupply

Oil prices fell on Wednesday following a reported rise in US crude inventories and an estimate that OPEC may have produced more crude in November than previously thought, potentially undermining a planned output cut.

International Brent crude futures were down 58 cents at $55.14 per barrel on Wednesday. US West Texas Intermediate crude oil futures were down 61 cents at $52.37 a barrel, Reuters reported. Traders said the price falls followed an industry report of surprise increases in US crude inventories.

Data from the American Petroleum Institute showed US crude inventories rose by 4.7 million barrels in the week to Dec. 9, compared with analysts’ expectations for a 1.6-million-barrel decline. Markets were also focused on an anticipated US interest rate hike that would likely boost the dollar, making dollar-traded fuel imports more expensive for the countries using other currencies. Oil traders said prices were further depressed by a report from the International Energy Agency which said it believes OPEC pumped about 34.2 million barrels per day of crude in November, more than 500,000 bpd above OPEC’s official estimate for October.

If true, that could undermine efforts by the Organization of Petroleum Exporting Countries and other producers such as Russia to cut almost 1.8 million bpd of production in an effort to end two years of oversupply and cheap oil.  The IEA said global oil supply rose to a record 98.2 million bpd in November, with OPEC’s production offsetting declines elsewhere.

This stands against expectations of 96.95 million bpd of global oil demand for the fourth quarter of 2016.