Oil Down as Russia Throws Cold Water on Deeper Cuts
(Bloomberg) -- Oil declined for a second day after Russia said it’s too early to talk about deeper output cuts, casting doubt on the ability of OPEC and its allies to balance supply against a worsening demand outlook.
Futures in New York fell as much as 0.7% after dropping 1.5% Monday. While the OPEC+ mechanism has shown its efficiency, it’s not infinitely efficient as there are still limits on how much each country can do, Russian Deputy Energy Minister Pavel Sorokin said in an interview with Tass. Meanwhile, Genscape Inc. said oil stored at a key Oklahoma storage hub expanded last week, reviving concerns over sluggish demand and ample inventories.
While crude is heading for its best month since June, it’s still down around 16% since late April as the U.S.-China trade war weighs on demand and American production keeps rising. Asian stocks rallied Tuesday on optimism Washington and Beijing are getting closer to a deal, but it’s unclear if a partial agreement that doesn’t roll back existing tariffs will have much impact on oil demand.
“Russia’s comments signal that there hasn’t yet been an agreed consensus within the OPEC+ coalition on making deeper cuts,” said Will Sungchil Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul. “This, combined with market expectations that U.S. crude stockpiles rose last week, will keep oil from pushing higher.”
West Texas Intermediate for December delivery fell 30 cents, or 0.5%, to $55.51 a barrel on the New York Mercantile Exchange as of 7:57 a.m. in London. The contract dropped 85 cents on Monday, the first decline in five sessions. It’s up 2.7% so far this month.
Brent for December settlement declined 22 cents, or 0.4%, to $61.35 a barrel on the London-based ICE Futures Europe Exchange after closing 0.7% lower on Monday. The global benchmark crude traded at a $5.82 premium to WTI.
It’s also necessary to monitor how U.S. crude production develops at current prices, Russia’s Sorokin told Tass. American output has stayed at a record high of 12.6 million barrels a day over the past three weeks, according to the Energy Information Administration data.
The Organization of Petroleum Exporting Countries will need to announce a further 500,000 barrels a day of output reductions at its December meeting to keep Brent prices from falling below $60 a barrel, Sanford C. Bernstein & Co. said in a note.
Crude inventories at Cushing, Oklahoma rose by 1.5 million barrels last week, according to data-provider Genscape. If confirmed by the official EIA figures due Wednesday, that would be a fourth straight week of gains at the U.S. storage hub.
--With assistance from James Thornhill.
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