Oil prices fall as doubt persist over market tightening

REUTERS  David McNew

REUTERS David McNew

Oil's bull market rally stumbled into some bad news. The 14-nation oil cartel, led by Saudi Arabia, accounts for almost 44 percent of the world's crude oil production.

The statement also stated that production interruption of oil-exporting Countries organization (OPEC) could not help balance supply-demand in global market in near term. The dollar also strengthened, diminishing the appeal of commodities.

With Libyan output falling, OPEC's contribution to reducing global inventories seems to be a zero-sum game. "That's all feeding in here to generating some downward pressure", John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone.

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A line has certainly been drawn between a drill-happy USA oil industry and their OPEC-led counterparts, whose oil-dependent economies are craving higher prices. A survey from Reuters noted that Oil output from the organisation of Petroleum Exporting Countries (OPEC) rose last month, gaining by 50,000 barrels per day (bpd).

Analysts say that a so-called market rebalancing is now well underway, meaning that demand is no longer undershooting available supply. USA crude CLc1 futures fell 16 cents or 0.3 percent to $50.42.

In that light, dealers confirmed that into Monday's weakness, asset managers and CTAs dumped CL, noting, November WTI broke the one month daily trend at $51.22 and the 200-day moving average at $50.93. WTI settled the third quarter 12% higher and September up 9%. ICE Brent for December 2017 delivery closed at $56.12, down $0.67 cents, or off 1.2% on the day.

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The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose as much as 0.5%. The U.S. benchmark posted its strongest quarterly gain since the second quarter of 2016.

"There's a lot of crude oil in storage still and OPEC, who knows what can happen there. But when you go forward, I would rather call it normalization". Gasoline inventories increased 1.6 million barrels last week, while distillate fuel inventories decreased by 2.6 million barrels last week and are in the lower half of the average range for this time of year.

US crude imports fell last week by 706,000 bpd. A resumption in output at Libya's Sharara oilfield fed the concerns.

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"A wide price premium of Brent over WTI crude has boosted appetite for US oil globally, which was reflected in the rise in exports", said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.

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