Oil prices settled 1 percent lower on Wednesday after OPEC reported its September oil output hit eight-year highs, offsetting optimism over the group’s pledge to bring a global crude glut under control.
The dollar index’s climb to a seven-month peak also weakened demand for greenback-denominated crude among holders of euro and other currencies.
Adding weight to the market was the possibility that the American Petroleum Institute could report the first build in U.S. crude stocks in six weeks in preliminary inventory numbers due at 4:30 p.m. EDT (2030 GMT), traders said. Analysts expect the U.S. government to say on Wednesday that crude stockpiles rose 300,000 barrels last week.
Brent crude settled down 60 cents, or 1.1 percent, at $51.81 a barrel.
U.S. West Texas Intermediate (WTI) crude slipped 61 cents, or 1.2 percent, to settle at $50.18.
Despite the drop, Brent is still up nearly 13 percent since the Saudi-dominated Organization of the Petroleum Exporting Countries announced on Sept. 27 that the group and other major crude producers will agree on a sizeable output cut or freeze to reduce a global glut by Nov. 30 when OPEC meets in Vienna.
Even so, OPEC’s latest monthly report, issued on Wednesday, showed an increase in its oil production in September to the highest in at least eight years and a rise in the forecast for 2017 non-OPEC supply growth.
The group produced 33.39 million barrels per day (bpd) last month, up 220,000 bpd from August, and as much as 890,000 bpd above the new supply target.
“Once again, it reinforces that their deeds are not matching their words, and that they have a great deal of work cut out for them to try and come to an agreement that will satisfy anything,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Officials of some of the world’s biggest oil trading companies told the Reuters Commodities Summit in London that crude was unlikely to achieve supply-demand balance until well into 2017.
“I don’t think they (OPEC) can do any substantial cut. There are too many uncertain factors involved,” Gunvor Group’s Chief Executive Officer Torbjorn Tornqvist said, adding that rising Nigerian and Libyan output were enough to “wipe out any other deal that has been agreed.”
Marco Dunand, CEO of Mercuria Energy Group Ltd, said prices could fall to the low $40s if OPEC failed to agree on a cut at the November meeting.