NEW YORK, OCTOBER 26, 2016 – Oil fell 1 percent on Wednesday on growing doubts that OPEC would cut production enough to drain a global glut, although prices bounced off session lows, with Brent returning above $50 a barrel after the U.S. government reported a surprise drawdown in crude inventories.U.S. crude stockpiles fell 553,000 barrels last week, the U.S. Energy Information Administration (EIA) said, a result contrary to the 1.7 million-barrel build that analysts polled by Reuters had forecast.
Crude inventories in the world’s largest oil producer have fallen unexpectedly in seven of the past eight weeks, bucking the trend usually seen during autumn when stockpiles rise as refineries go into maintenance. A preliminary report on Tuesday from the American Petroleum Institute, a trade group, had suggested a build of 4.8 million barrels for the Oct. 21 week.
Oil prices pared losses after the EIA data, with U.S. crude briefly trading in positive territory. But the rebound was limited by doubts about whether OPEC, which meets Nov. 30 in Vienna, will succeed in reducing a global crude glut.
Brent crude was down 75 cents, or 1.5 percent, at $50.04 a barrel by 12:33 p.m. EDT (1633 GMT). It fell as low as $49.65, its lowest since Sept. 30.
U.S. West Texas Intermediate (WTI) crude slid 60 cents, or 1.2 percent, to $49.36. Its session low was $48.87, a trough since Oct. 4.
“The focus point from here remains on the OPEC meeting that comes a month from now, with Iran, Libya and Nigeria all looking unlikely to commit to output cuts,” said Tariq Zahir, crude trader and fund manager at Tyche Capital Advisors in New York.
The Organization of the Petroleum Exporting Countries says it seeks to reduce some 700,000 barrels per day of production from an estimated glut of 1.0-1.5 million bpd.
Iran, Nigeria, Libya and Venezuela are expected to be exempted from production cuts. OPEC’s second largest producer Iraq surprised the market this week by saying it would not join the plan. Indonesia’s state oil firm is targeting a 42 percent increase in output next year.
Unless Russia, which is not in OPEC, joins the plan, the onus of a potential cut would fall on Arab producers in the Middle East: Saudi Arabia, Kuwait and the United Arab Emirates.