Oil fell more than 1 percent on Wednesday even after a surprise drawdown in US crude inventories, as traders remained cautious that Opec would be able to cut production come late November. US crude stockpiles fell 553,000 barrels last week, the US Energy Information Administration (EIA) said, compared with the 1.7 million-barrel build analysts polled by Reuters forecast.
Crude inventories in the world's largest oil producer have fallen unexpectedly in seven of the past eight weeks, bucking the usual autumn trend in which stockpiles rise as refineries go into maintenance season. Oil prices pared losses after the EIA data, with US crude briefly trading in positive territory and Brent returning above $50 a barrel. But the rebound was limited by doubts about whether the Organisation of the Petroleum Exporting Countries (Opec), which meets November 30 in Vienna, will succeed in its planned production cut.
"The focus point from here remains on the Opec meeting that comes a month from now, with Iran, Libya and Nigeria all looking unlikely to commit to output cuts," said Tariq Zahir, crude trader and fund manager at Tyche Capital Advisors in New York. Prices will likely continue falling, with WTI hitting $47 and Brent falling to $48 to $48.50 by the month's end as the market grows skeptical about Opec's jawboning, said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.
"We've seen bullish information," he said. "None of it is really new, so it's one of those things when the buyers are exhausted." Brent crude was down 86 cents, or 1.7 percent, at $49.93 a barrel by 13:53 pm EDT (1753 GMT). It fell as low as $49.65, its lowest since September 30. US West Texas Intermediate (WTI) crude slid 80 cents, or 1.6 percent, to $49.96. Its session low was $48.87, its lowest point since October 4.
Iraq, Libya and Nigeria are expected to be exempted from Opec's planned production cut, which seeks to cut about 700,000 barrels per day (bpd) from an estimated glut of 1.0 million to 1.5 million bpd. Iraq has said it would not participate, while Indonesia's state oil firm is targeting an output increase. Unless non-member Russia joins, the onus of a potential cut would fall on Saudi Arabia, Kuwait and the United Arab Emirates.