20 October 2016, London — Oil prices fell on Thursday on profit-taking, after markets rallied the previous day on another unseasonal draw in U.S. crude oil stocks helping bullish sentiment from an expectation of an OPEC-led cut in production.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $50.78 per barrel at 1230 GMT (0830 EDT), down 82 cents from their previous close. Brent crude futures LCOc1 were at $51.85 per barrel, also down 82 cents.
WTI futures settled at a 15-month high the previous day, fueled by a fall in U.S. crude stocks by 5.2 million barrels in the week ended Oct. 14 to 468.7 million barrels.
“Today we are drifting lower with WTI crude oil finding resistance at $52. The dollar gained some strength during the Asian session which also helped trigger some profit taking ahead of today’s ECB meeting,” said Ole Hansen, Saxo Bank’s head of commodity research.
The dollar stayed close to a seven-month high against a currency basket .DXY and a three-month high to the euro ahead of a European Central Bank (ECB) news conference. Oil extended losses a touch after the ECB held interest rates.
Analysts at JBC noted that U.S. crude oil stocks have been depleted by 26.5 million barrels in the past seven weeks which was unusual even when taking into account hurricanes that can disrupt oil production and supplies by tankers.
“The counterseasonal nature of the draw is also notable as we ought to be seeing builds on the back of fall refinery maintenance.”
This reduction in stocks in the world’s largest oil consumer has added to bullish sentiment that arose after the Organization of the Petroleum Exporting Countries (OPEC) proposed to cut or at least curb oil production.
While many remain skeptical about OPEC’s ability to strike and effectively implement a deal at a Nov. 30 meeting, the notion of coordination among the 14 member states has at least put a floor under Brent and WTI prices at around $50 a barrel.
Technical analysts are looking for both contracts to test higher levels soon, while BMI Research said it saw “significant potential for an upwards break in Brent towards $60 per barrel,” due to technical drivers even though there were few fundamentals supporting higher prices.
But analysts at PVM note OPEC’s record high production in recent months as well as rising global crude inventories.
“The oil market has been getting stronger on hopes and expectations in the absence of hard facts. Another way to put it is that oil prices are inflated. Whether the bubble will burst or grow even bigger depends on the end-November meeting.”
OPEC’s November meeting may agree on a half a million to 1 million barrels per day oil production cut. The producer cartel hopes non-OPEC exporters, especially Russia, will cooperate.
*Sabina Zawadzki; Henning Gloystein; Editing – Keith Weir & William Hardy – Reuters