Oil prices fall amid high OPEC output, rise in U.S. crude stocks

By Azernews

By Nigar Abbasova

World oil prices retreated on October 13 responding predictably to OPEC production data that revealed a rise up to the highest level in at least eight years and reports of an increase in U.S. crude stockpiles.

Brent crude futures traded at $51.46 per barrel, 0.68 percent down from the previous close, while U.S. West Texas Intermediate (WTI) crude stood at $49.76 per barrel, recording a decrease of 0.84 percent. The price of a barrel of Azeri Light crude oil decreased $0.67 to stand at $52.21 on the world markets.

The prices were hit and came under pressure after Organization of the Petroleum Exporting Countries (OPEC) reported a rise in output whilst the cartel aims to cut production in a bid to oust rein of supply glut that dominated in the market.

The cartel also raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year.

OPEC continued to boost supply, increasing output by 160,000 barrels per day and reaching a record high of 33.64 million barrels per day due to Iraqi pumping and Libya's reopening of its oil terminals.  

The indices were assessed by traders as an additional sign underlining OPEC's challenge in seeking to restrain supplies for the first time since 2008. The strong production by OPEC amid an outcry to cut output brings in the spotlight the eagerness of member states to protect their market shares.

Meanwhile, the Energy Information Administration is due to publish official storage inventory data in the short run. Expectations are gloomy for the market, as API (American Petroleum Institute) forecasted that U.S. crude inventories rose by 2.7 million barrels up to 470.9 million barrels.

The growth is expected to become the first rise in oil stocks following five straight weeks of declines. Softer gasoline consumption and the return of refineries from maintenance are considered to be main reasons of expected growth.

Along with negative factors, the market also received some support from China, which hit oil imports record last month leaving the U.S. behind and taking the position of world's top buyer of foreign oil for the third time in a year. China's September crude imports increased by 18 percent, as compared to a year earlier, reaching 8.04 million bpd on daily basis, while the U.S. four-week average stood at 7.98 million bpd.

The focus is now on the upcoming OPEC’s Vienna meeting where the cartel will discuss the implementation of preliminary Algeria deal aimed at speeding up a rebalancing of the market.

The group hopes to finalize details, deciding on how much each of its 14 members can pump, and convince oil producers outside the group to join the deal.  Prices initially responded positively to the preliminary consent, the market, however, is still in doubts about whether the cartel will eventually carry out the cuts.

Doubts about how much the deal would reduce a crude glut, raise additional concerns. Moreover, the fact that some countries demand to be treated as an exception is an additional concern for the market.