OIL PRICES: ABOVE $52 COURSE
According to WSJ, Oil prices fell on Thursday, unable to sustain the previous day's rally, as investors cashed in their overnight gains driven by a larger-than-expected decline in the U.S. crude inventory.
Brent crude, the global oil benchmark, fell 1% to $52.12 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 1% at $51.27 a barrel, having hit a more than one-year high the previous session after U.S. stocks data was published.
Energy Information Administration data showed U.S. domestic crude stocks dropped by 5.2 million barrels in the week ended Oct. 14, mainly due to lower imports.
However, with total crude stocks at 468.7 million barrels, it is still 5.4% higher than the same period last year and 31.5% above the five-year average. Oil which isn't imported into the U.S. also weighs on the already oversupplied world market.
"The outlook for the oil price going forward is quite bleak," said Eugen Weinberg, analyst at Commerzbank.
Mr. Weinberg pointed out that the recent rise in prices was encouraging higher production in the U.S., while the Organization of the Petroleum Exporting Countries was also expected to continue to boost its output ahead of a meeting in November to agree on a production cut.
The flexibility and speed of U.S. producers have greatly changed the dynamic of the global oil market. The emergence of U.S. shale oil is threatening producers from the Middle East and Russia who have been pumping at record levels to protect their market shares.
As a result, prices have been in a prolonged funk for over two years and producers who can't afford to keep operating at such low prices have either dropped out or scaled back.
The low prices have also prompted OPEC to suggest a collective production cut of 200,000 to 700,000 barrels a day for its members. The plan, which so far excludes Iran, Libya, and Nigeria, is expected to be discussed and possibly ratified in the Nov. 30 meeting.
Many market watchers aren't enthused by the deal, saying the group's longstanding internal tensions will make it difficult for all members to be on board. Even if a deal is struck, it remains a question if the members would abide by the production quotas.
"Despite skepticism on the OPEC deal, since it was announced, oil market participants have clearly become less bearish and more bullish," said Michael Wittner, head of oil market research at Société Générale.
Nymex reformulated gasoline blendstock—the benchmark gasoline contract—fell 1% to $1.50 a gallon. ICE gasoil changed hands at $476.00 a metric ton, down $7.75 from the previous settlement.
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