NEW YORK (Nov 8): Oil prices slipped on Wednesday, continuing a recent slide after surging U.S. crude output hit another record and domestic inventories rose more than expected.
The U.S. Energy Information Administration (EIA) said domestic crude inventories rose 5.8 million barrels in the latest week, more than double analysts' expectations.
Crude output hit 11.6 million bpd, a weekly record, though weekly figures can be volatile. Most recent monthly data for August showed overall production at more than 11.3 million bpd.
U.S. crude futures fell 54 cents to settle at $61.67 a barrel, nearly 20 percent below a peak close of $76.41 a barrel in early October.
“The market has yet to prove that it can hold onto a rally, so the short-term mood is still very negative," said Phil Flynn, analyst at Price Futures Group in Chicago.
Brent crude, the global benchmark, settled down 6 cents to $72.07 a barrel, bouncing off its post-EIA session low on support from earlier reports that Russia and Saudi Arabia are discussing whether to cut crude output next year.
While Iranian oil exports are expected to fall after U.S. sanctions took effect on Monday, reports from OPEC and other forecasters have indicated the global oil market could have a surplus in 2019 as demand slows. Also, the United States granted waivers on Iranian sanctions to eight countries who import that country's crude.
"The market is now going to look to OPEC and non-OPEC producers to rein in production as the U.S. has granted eight countries waivers from sanction, which in essence adds to supply," said Andrew Lipow, president of Lipow Oil Associates in Houston.
Russia and Saudi Arabia, top producers in an OPEC-led alliance, started bilateral talks on a return to production cuts next year, Russia's TASS news agency reported, citing an unnamed source. In June, the producer group decided to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump.
Analysts said those countries may be more willing to cut output now that the U.S. midterm elections are over. Trump, whose Republican party was fighting to retain control of congress, had complained of higher gasoline prices.
"OPEC was feeling the Trump pressure but producers took action with the thinking that they just needed to get past the U.S. election," said Joe McMonigle, analyst at Hedgeye in Washington, in a note Wednesday. "We expect to start hearing public comments from OPEC ministers this weekend" about pulling back on production.
A ministerial committee composed of some members of the Organization of the Petroleum Exporting Countries and allies meets on Sunday in Abu Dhabi to discuss the outlook for 2019.