SINGAPORE (Reuters) – Oil fell on Wednesday after climbing over 1% in the previous session as U.S. industry data showed a bigger-than-expected build in crude stocks, but the possibility of deeper output cuts from OPEC and its allies prevented a further decline.
FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. REUTERS/Stringer
Brent crude futures LCOc1 dropped 23 cents, or 0.39%, to $59.47 a barrel by 0652 GMT on Wednesday.
West Texas Intermediate (WTI) crude futures CLc1 for December delivery, the new front-month contract, fell 32 cents, or 0.59%, to $54.16 per barrel. The November contract expired on Tuesday at $54.16.
U.S. crude stocks rose by 4.5 million barrels to 437 million barrels in the week ended Oct. 18, compared with analysts’ expectations for a gain of 2.2 million barrels, data from industry group the American Petroleum Institute showed.
Inventory data from the U.S. Energy Information Administration (EIA) is due later on Wednesday.
Helping underpin prices, the Organization of the Petroleum Exporting Countries (OPEC) is mulling whether to deepen production cuts amid concerns of weak demand growth next year.
“The OPEC induced oil rally has come to a grinding halt in the wake of the bearish to consensus API inventory swell,” said Stephen Innes, market strategist at AxiTrader.
“Further OPEC cuts are unlikely the cure-all medicine. But by the numbers, the magnitude of the expected oversupply in 2020 is thought to be well within OPEC’s ability to manage,” Innes added.
OPEC and other oil producers including Russia, a group known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020. OPEC and other non-members are scheduled to meet again Dec. 5-6.
“The threat of weaker demand, signs that shale activity is slowing and the inevitability of legacy non-OPEC projects coming online will be sufficient in our view to lead the group (OPEC) to extend their cut at the upcoming December meeting,” Goldman Sachs said in a note.
Meanwhile, easing trade tensions between China and the United States, the world’s two largest economies and biggest oil consumers, were also helping to cushion overall sentiment for oil, traders said.
U.S. President Donald Trump said earlier this week that efforts to end the trade war with China were going well, a view echoed by Chinese Vice Foreign Minister Le Yucheng on Tuesday.
“With the headwinds of strong U.S. producer hedging and high freight rates fading, we expect stronger Brent timespreads and higher prices in coming weeks, with upside risk to our year-end $62 per barrel forecast,” Goldman Sachs said.
The investment bank expects Brent prices to continue trading around $60 a barrel in 2020.
Reporting by Koustav Samanta; Editing by Christian Schmollinger and Richard Borsuk