Oil declined in New York after failing to break through $50 a barrel on Wednesday amid concern that the global surplus will persist into next year.
Futures fell as much as 1 percent after advancing 2.3 percent Wednesday to the highest close in more than three months. The market is set to remain oversupplied in 2017 and prices will stall at $55 a barrel as shale drillers get back to work, Goldman Sachs Group Inc.’s Head of Commodities Research Jeff Currie said. U.S. crude stockpiles shrank below 500 million barrels last week for the first time since January, according to government data.
Oil has gained about 11 percent since the Organization of Petroleum Exporting Countries agreed last week to cut production for the first time in eight years. Some analysts have expressed doubt that the individual quotas for output — to be determined at an official meeting of the group in Vienna on Nov. 30 — will be sufficient to erode the market surplus as several countries boost production to restore disrupted supplies.
“We see more downside than upside to oil prices from current levels,” said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. in Zurich. “We remain skeptical that OPEC’s deal will set bounds to the existing supply glut. Middle Eastern exports are set to grow in the near term and the return of Nigeria and Libya are not-to-underestimate bearish wildcards.”
West Texas Intermediate for November delivery lost as much as 50 cents to $49.33 a barrel on the New York Mercantile Exchange and was at $49.78 as of 10:03 a.m. London time. The contract increased $1.14 to $49.83 on Wednesday, the highest close since June 29. Total volume traded Thursday was about 23 percent below the 100-day average. Prices rose 7.9 percent last month.
Brent for December settlement lost as much as 54 cents, or 1 percent, to $51.32 a barrel on the London-based ICE Futures Europe exchange. The contract gained 2 percent to $51.86 on Wednesday, the highest close since June 9. The global benchmark crude traded at a $1.54 premium to WTI for December.
U.S. crude stockpiles dropped by 2.98 million barrels for a fifth weekly decline, the Energy Information Administration reported Wednesday. A Bloomberg survey had forecast a supply gain. Crude production declined for a second week to 8.5 million barrels a day.
Global oil markets are set to remain oversupplied amid the return of suspended output in Nigeria and Libya, resilient U.S. shale production and the start of major projects commissioned over the past 10 years, Goldman’s Currie said in a Bloomberg Television interview. Hurricane Matthew is expected to intensify as it approaches the U.S. East Coast. OPEC members will meet next week for talks on implementing their deal to cut output, with Russia joining to discuss how producers from outside the group can participate in the plan, according to Venezuela’s oil minister.
© 2016 Bloomberg L.P