By Myra P. Saefong, MarketWatch , Jenny W. Hsu
Oil futures fell Wednesday as uncertainty over Russia’s willingness to cut production and a monthly rise in output from OPEC members sent prices lower for a second session in a row.
On the New York Mercantile Exchange, November West Texas Intermediate crude /zigman2/quotes/209727031/delayed CLX26 0.00% fell 61 cents, or 1.2%, to settle at $50.18 a barrel after losing 1.1% a day earlier. December Brent crude on London’s ICE Futures exchange lost 60 cents, or 1.1%, to $51.81 a barrel.
The increase in oil production comes at a time when producers inside the Organization of the Petroleum Exporting Countries are in discussions with Russia, a non-OPEC player, on ways to chip away the glut and stabilize prices. Russian President Vladimir Putin has expressed support for a collective cut, but several media reports say that Igor Sechin, the head of Russia’s state-owned energy company Rosneft and Russia’s largest oil producer, is snubbing the proposal.
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Rosneft produces nearly 40% of the country’s oil production and over 5% globally, according to the company’s website.
Lack of a clear commitment by Russia to slash production is exacerbating investors’ doubts whether or not the preliminary agreement OPEC members reached in late September to cut output by 200,000 to 700,000 barrels a day will be implemented. A condition of the cut is the understanding that Russia would be on board.
“Beyond Russia, OPEC’s bigger stumbling block will likely be determining individual targets for each member, with substantial discrepancy in several countries between self-reported output figures and estimates by secondary sources,” said Robbie Fraser, commodity analyst at Schneider Electric.
“Those discrepancies will need to be resolved for any effective output deal to work, and they serve to highlight the still substantial issues facing a final agreement,” he said.
Meanwhile, United Arab Emirates Oil Minister Suhail Al Mazrouei played down the prospect of new details on the output plans Wednesday on the sidelines of an energy conference in Istanbul.
A monthly report issued by OPEC on Wednesday showed that its members output rose by 220,000 barrels a day in September to 33.39 million barrels a day. The report based its number on sources, which include industry analysts.
The International Energy Agency said in a report Tuesday that OPEC raised its output by 160,000 barrels a day to a record 33.64 million barrels a day in September.
Global oil supply in September hit 97.2 million barrels a day, 600,000 barrels more than the previous month and 200,000 barrels a day higher than the corresponding month a year ago, the IEA said. The data showed the majority of the rise came from Russia.
Speculation surrounding OPEC and Russia is likely to “come and go,” with “no deal likely until the end of November—6 weeks away,” said Colin Cieszynski, chief market strategist at CMC Markets. OPEC has said it won’t complete details of its output pact until its next meeting on Nov. 30.
Meanwhile, a report from S&P Global Platts Wednesday showed that China’s apparent oil demand in August fell by 4.3% from the same month a year ago to 10.76 million barrels a day. It cited a decline demand for gasoil, fuel oil and gasoline for the overall fall in oil consumption.
Energy investors will also be eyeing the U.S. weekly inventories data due Thursday from the Energy Information Administration. The American Petroleum Institute will release its own data late Wednesday. The reports were each delayed by a day due to the Columbus Day holiday on Monday.
Analysts polled by S&P Global Platts expect an increase of 250,000 barrels in crude stocks on the back of a decline in refinery activity because of fall refinery maintenance and some unplanned outages. But crude supplies have shown unexpected declines for the past five weeks in a row.
Early Thursday, the EIA will also release its short-term energy outlook and winter fuels outlook reports and an update on U.S. natural-gas supplies.
Back on Nymex, November gasoline ended at $1.462 a gallon, down 2.1 cents, or 1.4%, while November heating oil lost 2.1 cents, or 1.3%, to $1.567 a gallon.
November natural gas meanwhile, fell by 2.7 cents, or 0.8%, to $3.21 per million British thermal units after losing 1.2% a day earlier.