Oil trades near $55 as investors wait for clarity on OPEC action

By Rakteem Katakey and Ben Sharples on 11/16/2017

LONDON and HONG KONG (Bloomberg) -- Oil slid toward $55/bbl as traders who were once certain OPEC and Russia would extend their output cuts beyond March aren’t so sure anymore.

Futures dropped 0.4% in New York after falling 2.5% the previous two sessions. OPEC hasn’t yet convinced Russia that it’s necessary to reach an agreement to extend oil-output cuts at a meeting in Vienna this month, people with knowledge of the matter said this week. U.S. crude inventories expanded for a second week while output climbed a fourth time to 9.65 MMbpd, the highest in more than three decades, government data showed.

Oil reached a two-year high last week as Saudi Crown Prince Mohammed bin Salman arrested princes, officials and businessmen in what the government called a corruption purge. Signs of tightening supplies and speculation that the Organization of Petroleum Exporting Countries and its allies would prolong output curbs also buoyed prices. Yet oil has dropped in recent days as it emerged that the outcome of the Nov. 30 meeting is far from certain.

“There’s now just a 50-50 chance of an announcement coming after this meeting, and I wouldn’t have said that even a week ago,” said Michael Poulsen, an analyst at Global Risk Management Ltd. “It is suddenly a very mixed picture.”

West Texas Intermediate for December delivery was at $55.13/bbl on the New York Mercantile Exchange, down 20 cents, at 9:11 a.m. local time. Total volume traded was about 26% below the 100-day average. Prices fell 37 cents to $55.33 on Wednesday.

Brent for January settlement slid 32 cents to $61.55/bbl on the London-based ICE Futures Europe exchange, after losing 34 cents on Wednesday. The global benchmark was at a premium of $6.25 to January WTI.

Russian oil bosses meeting with Energy Minister Alexander Novak on Wednesday had differing opinions about whether an extension to cuts was necessary or how long it should last, a government official said, asking not to be named because they’re not authorized to speak to the press. Discussions will resume next week.

U.S. crude stockpiles rose by 1.85 MMbbl last week, according to a report from the Energy Information Administration. That’s in contrast to a Bloomberg survey, which had forecast a decline. Inventories at Cushing, Okla., the delivery point for WTI and the biggest U.S. oil-storage hub, fell by 1.5 MMbbl.

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