Oil cuts loss on US stockpile data as Russia talks up OPEC deal

Oil prices whipsawed in morning trade as comments from the Russian energy minister offset bearish U.S. crude stockpile data.

Oil prices shed more than 1 percent on Wednesday, returning some of the gains made in one of the year’s biggest rallies a day earlier, after weekly U.S. crude stocks rose beyond expectations and a strong dollar weighed on commodities.

But almost immediately after extending losses on the stockpile data, crude staged a rally as Russia’s energy minister said he sees big chances for OPEC to agree to limit oil production.

Global benchmark Brent crude was down 8 cents at $46.87 a barrel at 11:27 a.m. ET (1533 GMT). It closed Tuesday 5.7 percent higher on news that members of the Organization of the Petroleum Exporting Countries would renew efforts to limit production.

U.S. crude fell 1 cent to $45.80 a barrel, after settling about 5.8 percent higher in the previous session.

Weekly U.S. crude oil stocks surged by 5.3 million barrels last week, the U.S. Energy Information Administration said, exceeding analyst expectations of a 1.5-million-barrel rise.

The increase came as refineries hiked output and U.S. crude imports rose last week by 910,000 barrels per day.

Gasoline stocks rose by 746,000 barrels, compared with analysts’ expectations in a Reuters poll for a 416,000-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 310,000 barrels, versus expectations for a 1.7 million-barrel drop, the EIA data showed.

U.S. oil production ticked down by about 11,000 barrels a day.

A strong dollar also weighed on oil, with the index measured against a basket of currencies hitting a 14-year high.

The U.S. inventory news earlier dampened a rally infused by news that OPEC members were meeting ahead of an official group gathering on Nov. 30 to build consensus for a deal to limit output, and by oil pipeline attacks by militants in Nigeria.

A number of energy ministers from OPEC countries are likely to meet informally in Doha on Friday to try to build consensus over decisions taken by the full group in September in Algiers, an Algerian energy source said.

Two sources familiar with discussions said efforts were under way to narrow gaps and a final agreement would be reached. One issue has been the level of production at which Iran would be expected to freeze its output.

Sources say Iran wants an output cap of 4 million barrels per day, while other members of the Organization of the Petroleum Exporting Countries want Iran to freeze supply at about 3.7 million bpd.

Iranian oil minister Bijan Zanganeh will not attend the talks, two OPEC sources said, adding that Iran’s OPEC governor would represent Iran.
“We estimate the possibility of an actual OPEC production cut as 50-50,” said Hans van Cleef, senior energy economist at ABN Amro.

“If OPEC would stick to its intention to set its production ceiling at 32.5 million barrels a day, or even lower, market optimism will likely pick up, which could be supportive for oil prices.”

The Dutch bank lowered its oil price forecasts on Wednesday, expecting Brent and U.S. crude to average $50 a barrel in the fourth quarter.

In a bullish signal for the oil market, the International Energy Agency (IEA) said on Wednesday oil consumption will peak no sooner than 2040 despite the entering into force of the Paris climate deal which intends to wean the world off fossil fuels by the end of the century.