Oil closes lower as Russian Federation casts doubt on OPEC cuts extension

Oil closes lower as Russian Federation casts doubt on OPEC cuts extension

Oil prices declined on Wednesday after report showed an increase in US crude stockpile.

At the time of writing, Brent crude oil prices were trading 0.54 per cent lower at $62.82 per barrel while U.S. benchmark West Texas Intermediate (WTI) prices were down 0.48 per cent at $56.49 per barrel.

The price falls mean that crude prices are now down by around 5 percent since hitting 2015 highs last week, ending a 40-percent rally between June and early November.

Crude oil stocks in the USA were seen down 2.850 million barrels, while distillates were expected to post a drop of 1.775 million barrels and gasoline inventories expected down 1.025 million barrels.

The IEA on Tuesday cut its oil demand growth forecast by 100,000 barrels a day for this year and next, to an estimated 1.5-million barrels a day in 2017 and 1.3-million barrels a day in 2018.

"Using a scenario whereby current levels of OPEC production are maintained, the oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2Q18", the agency said.

"We expect prices to remain soft and move related to any rhetoric that comes out prior to those meetings from all of the involved parties", Adam Wise, who oversees an $8 billion energy portfolio at John Hancock Financial Services Inc in Boston, said by telephone. Also, supplies are likely to exceed that level, particularly as US production continues to rise. Meanwhile, U.S. government data showed that production climbed to a fresh record.

Despite the cautious sentiment, traders said oil prices were unlikely to fall far, largely due to supply restrictions led by the Organization of the Petroleum Exporting Countries and Russian Federation, which have helped reduce excess stockpiles.

Global oil demand growth is likely to have slowed to 1.3 million bpd in the third quarter of this year, in part because of the impact of hurricanes Harvey and Irma in August and September on USA consumption.

Global energy markets are set for "major upheaval" as the USA cements its status as the world's largest oil and gas producer, while China overtakes it as the biggest oil consumer.

United States oil production has already increased by more than 14% since mid-2016 to 9.62-million barrels a day and is expected to grow further.

The IEA said warmer temperatures could reduce consumption, while sharply rising output from some producer countries might bring back the global crude glut in the first half of 2018.

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