Oil prices fell about 1 percent on Wednesday on renewed concerns about an oil glut sparked by rising US crude inventories in storage and OPEC saying output cuts must be implemented to avoid the prospect of a growing surplus.
Inventories at the Cushing, Oklahoma, delivery hub rose once again, the sixth build in seven weeks, data from the Energy Information Administration showed on Wednesday.
Crude inventories overall fell by 2.6 million barrels in the last week, compared with analyst expectations for a decrease of 1.6 million barrels, the data showed.
However, traders pointed to most of the declines being in PADD 5, or the West Coast, saying that did not truly reflect supply demand fundamentals of the energy complex. Crude stocks in PADD 5 fell about 2.3 million barrels.
“This week really doesn’t point to an effort to clear inventories from PADD3 (Gulf Coast) like many expected,” said Troy Vincent, analyst at New York-based ClipperData.
“The decline in stocks is predominately from the West Coast, while Gulf Coast imports actually ticked higher and stocks only fell 400,000 bpd.”
Brent futures for February delivery fell 35 cents to $55.37 a barrel, a 0.6 percent loss, by 1618 GMT. US crude fell 58 cents to $52.40 per barrel, a 1.1 percent loss.
Meanwhile, the Organization of the Petroleum Exporting Countries on Wednesday signalled a growing oil supply surplus next year unless members implement their deal to curb output from record levels and outside producers also deliver on cutback pledges made over the weekend.
In a monthly report, OPEC said that without cuts the 2017 overhang would reach 1.24 million bpd, about 300,000 bpd higher than the forecast in its previous report.
OPEC pumped 33.87 million bpd last month, according to figures OPEC collects from secondary sources, up 150,000 bpd from October.
Energy, Industry and Mineral Resources Minister Khalid Al-Falih said it would take some time for the market to recover after the deal between OPEC and rival producers to limit supplies.
“We expect the impact ... in terms of fundamentals to take several months to be reflected on the market,” Al-Falih told reporters.
OPEC and 11 producing countries from outside the group agreed to cut almost 1.8 million bpd of production in an effort to end two years of oversupply and cheap oil.
However, Russian Energy Minister Alexander Novak said on Wednesday that adjustments by oil companies would be “voluntary” to meet the country’s commitment to trim output by 300,000 bpd.
“History shows that Russia has a very poor track record in keeping its promises when it comes to cutting output in cooperation with OPEC; Russia has never actually done any cutting in the past,” Michael Wittner, global head of oil research at Societe Generale said in a note.
Markets also focused on an anticipated US Federal Reserve interest rate hike that would likely boost the dollar, making greenback-traded fuel imports more expensive for countries using other currencies.
“The market is demanding a rate rise and the Fed better deliver it today, for if it doesn’t the bank’s credibly will be severely damaged,” said Fawad Razaqzada, market analyst for forex.com.

Source: Arab News