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Futures Movers: U.S. oil set for 3rd straight loss as OPEC+ unlikely to discuss deeper production cuts

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Reuters
Oil prices sink ahead of OPEC+ gathering

Oil futures on Thursday headed lower after an IEA monthly report showed a rise to global supplies and as an OPEC+ gathering, during the sidelines of World Energy Congress in Abu Dhabi, wasn’t expected to yield a discussion on deeper cuts to production limits currently in place.

West Texas Intermediate crude for October delivery CLV19, -2.53% fell $1.16, or 2.1%, at $54.59 a barrel on the New York Mercantile Exchange, after falling nearly 3% skid on Wednesday, marking the lowest close for a front-month contract since Sept. 3, according to Dow Jones Market Data. A third straight decline would mark WTI’s longest skid this month. November Brent crude BRNX19, -2.52% lost $1.35, or 2.2%, to $59.46 a barrel on ICE Futures Europe, after shedding 2.5% a day ago.

Oill prices headed lower after a monthly report from the International Energy Agency said that supplies from outside of OPEC would rise by 2.3 million barrels a day in 2020.

Reuters reported that Saudi Arabia’s new energy minister, Prince Abdulaziz bin Salman, indicated that there would not be a discussion about tightening output limits before a meeting of the Organization of the Petroleum Exporting Countries planned for Dec. 5 and 6.

Abdulaziz said, however, that, Saudi Arabia, the de facto leader of OPEC by dint of its production capacity, would trim its output by more than it agreed to as a part of a world-wide pact to trim global supplies by 1.2 million barrels per day, Reuters said.

Market participants had raised the likelihood that OPEC+, a group of OPEC members that includes Russia, would act to stem recent bearish developments for crude prices, amid reports by Bloomberg News that President Donald Trump discussed easing sanctions on Iran in a move to sure a meeting with Hassan Rouhani, Iran’s president, later this month.

“The challenges for OPEC are now more daunting as the cartel and its playing hard to get counter partner Russia is now having to face the reality that stored Iranian oil could flood the market,” wrote Phil Flynn, senior market analyst at Price Futures Group, in a Thursday research report.

The monthly report from the International Energy Agency said that supplies from outside of OPEC would rise by 2.3 million barrels a day in 2020.

Flynn said that compliance to the OPEC production limit has been starting to slip. “To date, support for the agreement rate has been high, but ahead of the meeting data for August show the compliance rate slipping to 116 per cent,” he wrote.

“In August, three major countries Russia, Nigeria and Iraq, produced 0.6 mb/d more than their allocations. Saudi Arabia, on the other hand, produced 0.6 mb/d less than allowed, and it is clearly the lynchpin of the whole deal,” he said.

Read: U.S.-Iran developments provide a complicated backdrop for the OPEC+ meeting

OPEC on Wednesday lowered its forecast for global oil-demand growth in 2019 and 2020, citing weaker-than-expected data in the first half of this year from various global demand centers and slower economic growth projections.

Also on Wednesday, the Energy Information Administration reported that U.S. crude supplies fell by 6.9 million barrels for the week ended Sept. 6. That marked a fourth weekly decline in a row. On average, analysts polled by S&P Global Platts forecast a fall of 3.6 million barrels, while the American Petroleum Institute on Tuesday reported a drop of 7.2 million barrels.