Oil pares losses as Iraq signals support for OPEC output cut

Oil prices cut earlier losses after Iraq said it was willing to “shoulder responsibility” for some of OPEC’s planned production cuts and as U.S. government data showed crude inventories fell last week.

OPEC’s deal faced potential setbacks from Iraq’s call for it to be exempt. Baghdad had said it needs oil revenues to fight Islamic State militants and questioned whether it should cut from the levels of OPEC’s estimates or its own, higher, production figures.

But Prime Minister Haider al-Abadi told reporters on Wednesday in Baghdad that Iraq is willing to cut its crude oil output as part of OPEC’s plan to reduce global supply and boost crude prices.

“What we lose in lowering production we will gain in oil revenues,” he said. “Our priority is to raise the price of a barrel of crude.”

Abadi’s comments are the clearest indication so far that Baghdad will support an OPEC plan to cut production by 4 percent to 4.5 percent when it meets on Nov. 30 in Vienna.

International Brent crude oil futures fell 16 cents to $48.96 a barrel by 11 a.m. (1600) after climbing to $49.42 a barrel earlier in Wednesday’s session on optimism OPEC would agree to an output cut.

U.S. West Texas Intermediate (WTI) crude oil futures were down 12 cents to $47.91 a barrel after rising to $48.30 earlier on Wednesday.

U.S. crude stocks fell last week as refineries hiked output and imports fell, data from the Energy Information Administration showed on Wednesday.

Crude inventories fell by 1.3 million barrels in the last week, compared with analysts’ expectations for an increase of 671,000 barrels.

Offsetting the headline data, gasoline stocks rose by 2.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 643,000-barrel gain. Distillate stockpiles, which include diesel and heating oil, were up by 327,000 barrels, versus expectations for a 357,000-barrel drop.

Futures had edged lower on Wednesday on investors’ doubts that OPEC would agree to a large enough output cut to significantly reduce the global surplus when it meets next week.
A strong dollar, trading near the 13½-year peak hit last week, also weighed on prices amid thin trading ahead of the U.S. Thanksgiving holiday on Thursday.

Exxon Mobil’s giant oil refinery in Baton Rouge, Louisiana, was operating at planned rates on Wednesday after a fire Tuesday, according to a person familiar with the plant’s operations. The refinery is the fourth-largest in the United States, with capacity to refine 502,500 barrels per day in crude oil.