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Oil falls one-week low as Russian comments add to accord doubts
[NEW YORK] Crude fell to a one-week low as speculation mounts that Russia won't join Opec to curb supply and analysts predict US stockpiles climbed.
Futures dropped 1.1 per cent in New York. Output cuts aren't "an option for us," said Russia's envoy at Opec, Vladimir Voronkov, according to Interfax.
The producer group has wanted Russia to join it in curbing shipments to support prices. US crude supplies probably rose two million barrels last week, a Bloomberg survey showed before Energy Information Administration data Wednesday. Oil came off its lows as the US dollar retreated against its peers.
Oil has fluctuated near US$50 a barrel amid uncertainty about whether the Organisation of Petroleum Exporting Countries (Opec) can implement an accord to cut output when its members gather in November.
A committee will meet this week to try to resolve differences over how much individual members should pump.
Last month's Opec deal pushed prices higher, bringing some drilling back in the US, which has in turn prevented crude from making new highs.
"The nonsense around the production agreement comes in and out of the market," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
"It's coming out of oil today because of the Russian statements, which come after Iraq made it clear that they weren't going to make a cut."
West Texas Intermediate for December delivery slipped 56 US cents to settle at US$49.96 a barrel on the New York Mercantile Exchange. It's the lowest close since Oct 17. Total volume traded was 16 per cent below the 100-day average.
Futures dropped from the settlement after the industry-funded American Petroleum Institute was said to report US crude supplies grew by 4.75 million barrels last week. WTI traded at US$49.53 at 4.36 pm in New York.
Brent for December settlement fell 67 US cents to US$50.79 a barrel on the London-based ICE Futures Europe exchange. It's the lowest close since Sept 30.
The global benchmark ended the session at an 83 US cent premium to WTI. US Stockpiles US crude supplies dropped to 468.7 million barrels in the week ended Oct 14, the lowest since January, according to EIA data. Inventories have declined in six of the past seven weekly reports.
"The most important dynamic that's been a surprise is the drop in US supplies," said Jay Hatfield, the New York-based portfolio manager of the InfraCap MLP ETF with US$120-million in assets.
"The Opec agreement brought the rally forward by a few months. It was going to happen early next year because of supply and demand."
Saudi Arabia faces the prospect of much deeper - and financially painful - oil production cuts after Iraq joined the queue of group members seeking immunity from the deal hatched in Algiers.
Iraq is the fourth Opec member - after Iran, Nigeria and Libya - to seek an exemption. Iraq shouldn't have to take part because it's embroiled in a war with Islamic militants, Oil Minister Jabbar Al-Luaibi said Sunday in Baghdad.
"The idea that they will come together and form a coalition to make cuts is mind-boggling," said Stephen Schork, president of the Schork Group Inc, a consulting company in Villanova, Pennsylvania.
Iraq could accept a decision to freeze output based on an "actual" production level of more than 4.7 million barrels a day rather than the lower figure Opec uses from secondary sources, Oil Ministry spokesman Asim Jihad said Tuesday. The organisation pegs Iraqi production at less than 4.2 million barrels a day.
Opec Secretary-General Mohammed Barkindo said the 14-nation group is facing its toughest challenge after meeting Al-Luaibi for talks in Baghdad Tuesday. The organisation is also trying to woo non-OPEC producers to join in the cuts.
So far this month, Libya and Nigeria have managed to increase their daily output by 220,000 barrels and 300,000 barrels respectively. Iran has steadily increased production since sanctions were lifted at the start of the year.
Tehran has repeated it aims to ramp up its output to around four million barrels day from around 3.7 million a day estimated by Opec for September.
"Opec is not a well-oiled machine when it comes to implementing cuts," Mr Hatfield said.
"Their credibility is low and they're deeply divided politically."