Oil prices fell on Wednesday following a reported rise in U.S. crude inventories and an estimate that OPEC may have produced more crude in November than previously thought, potentially undermining a planned output cut.
U.S. West Texas Intermediate (WTI) crude oil futures were down 69 cents, or 1.3 percent, to $52.29 a barrel at 0430 GMT.
International Brent crude futures were down 69 cents, or 1.2 percent, at $55.03 per barrel.
Traders said the price falls followed a report of surprise increases in U.S. crude inventories. Markets were also focused on an anticipated U.S. interest rate hike, likely supporting the dollar and making dollar-traded fuel imports more expensive for countries using other currencies at home.
“Momentum continues to wane in oil markets with both Brent and WTI slightly lower overnight, following higher than expected API inventory numbers in the United States … (which) showed an unexpectedly large increase of 4.7 million barrels,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.
“We expect Asia trading to have a slightly negative bias as traders trim longs into the Federal Reserves’ main event this evening,” he added, referring to the expected decision later on Wednesday by the U.S. central bank to hike interest rates.
Greg McKenna, chief market strategist foreign exchange and futures brokerage AxiTrader said that “traders pretty much have a Fed increase of 25 basis points locked and loaded.”
Oil traders said prices were further depressed by a report from the International Energy Agency (IEA) which said it believes that Middle East producer club OPEC pumped about 34.2 million barrels a day of crude in November, 500,000 bpd above OPEC’s official estimate, which was already a record.
If correct, that would undermine the effort by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers like Russia to cut almost 1.8 million bpd of production in a bid to end two years of oversupply and cheap oil.
The agency said global oil supply rose to a record 98.2 million bpd in November, as OPEC production offset declines elsewhere.
This stands against expectations of 96.95 million bpd of global oil demand for the fourth quarter of 2016.
Despite this, the IEA said that due to firm demand increases, oil market could show a shortfall of 600,000 bpd early next year if producers stick to their reduction plans.