Oil prices fell further on Friday as swelling inventories depressed sentiment despite widespread expectations that OPEC and Russia would agree some form of production cut next week.
The two global oil benchmarks, North Sea Brent and U.S. light crude, have had their weakest month for more than 10 years in November, losing more than 20 percent as global supply has outstripped demand.
U.S. West Texas Intermediate was down 52 cents, or 1 percent, at $50.93, after earlier falling as low as $49.65 Brent was down 76 cents, or 1.3 percent, at $58.75 a barrel by 2:28 p.m. ET, having bounced from a session low of $58.25.
Prices pared losses from session lows after Bloomberg reported OPEC’s advisory committee suggested decreasing production by 1.3 million barrels per day (bpd) from last month’s levels, traders said.
“Oil prices bounced back late in the day on Friday on reports that the OPEC committee had suggested a 1.3 million barrel per day cut from the October level,” said Fawad Razaqzada, market analyst at futures brokerage Forex.com.
“The pressure has certainly been building as prices continued to fall amid ongoing concerns over excessive supply and lower demand growth … If no action is taken, oil prices could certainly drop further, while a production cut should lead to a sizeable rebound for these severely oversold levels.”
OPEC and its main partner Russia are due to meet in Vienna on Dec. 6 and 7 to agree production strategy.
Before the OPEC meeting, the world’s top three producers — the United States, Russia and Saudi Arabia — will be part of a meeting this weekend of the Group of 20 industrialized nations in Buenos Aires, Argentina.
Russia’s energy minister Alexander Novak will meet his Saudi counterpart at the G20 summit in Argentina and discuss an oil output reduction in 2019, RIA news agency cited Novak as saying on Friday.
He was also reported to have said that Russia’s 2019 oil output is expected at the same level as this year but could be adjusted, depending on a deal between OPEC and non-OPEC members.
Surging oil production in the United States, Russia and by members of the Middle East-dominated OPEC has helped fill global inventories and create a glut in some markets.
U.S. crude oil production rose 129,000 bpd in September to a fresh record of 11.475 million bpd, the U.S. Energy Information Administration said in a monthly report on Friday.
A slowdown in oil demand growth is compounding the emerging oversupply.
“At the heart of the malaise are concerns that OPEC+ will not do enough to address the current oversupply,” said Stephen Brennock, analyst at London brokerage PVM Oil.The weakness in sentiment is visible in the Brent forward price curve, which now has prices for future delivery above those for immediate dispatch, a structure known as “contango”, which can make it attractive to put oil into storage.
A monthly Reuters survey indicates that output in November from the 12 OPEC members with supply reduction targets under a previous production agreement fell 110,000 barrels per day from October, while total OPEC output decreased by 160,000 bpd.
On Friday, a CME group indicator suggested that expectations of a production cut were weakening. The tool, known as OpecWatch, uses West Texas Intermediate crude oil options markets to calculate the probabilities of certain outcomes of OPEC meetings.
The market sentiment has shifted from a 70 percent expectation of a small production cut earlier this week to about a 56 percent chance on Friday, CME Group said.
Oil inventories are rising fast in the United States, where crude stocks have risen for 10 straight weeks to 450.5 million barrels, the most in a year, as production remains at an all-time high of 11.7 million bpd, according to the Energy Information Administration.
U.S. energy firms this week added oil rigs for a third week in four and increased the rig count for the fifth month in a row, General Electric’s Baker Hughes energy services firm said in its closely followed report on Friday.