Oil slipped on Thursday on concerns that rising U.S. output would hamper OPEC’s attempts to tighten supplies, outweighing worries about the shutdown of a major U.S. pipeline.
Brent crude traded at $62.92 per barrel at 1216 GMT, or 40 cents below its last close.
U.S. light crude was down 16 cents on the day at $57.86, easing back from a two-year high of $58.15 hit on Wednesday following news that TransCanada Corp’s Keystone pipeline was shut due to an oil spill.
The pipeline carries 590,000 barrels per day (bpd) from Canada to the United States. It is expected to stay shut for several weeks.
The boost to prices was short-lived as rising output in the United States has renewed concerns about global oversupply.
U.S. output has risen by 15 percent since mid-2016 to a record 9.66 million bpd, helping turn the United States from the world’s biggest importer to a major exporter.
“The U.S. will, without question of doubt, be the biggest oil producer in the world in the next five years. They are producing… at half the cost than they were just two years ago,” said Matt Stanley, fuel broker at Freight Investor Services in Dubai.
Climbing U.S. output threatens efforts by the Organization of the Petroleum Exporting Countries, Russia and some other non-OPEC producers to reduce global supplies by limiting their production.
“Whatever OPEC will be discussing and … agreeing upon can be made redundant by the actions of U.S. suppliers, which are likely to hike up production in a similar order,” said Eugen Weinberg, head of commodities research at Commerzbank.
He said another rise of 800,000 to 1 million bpd in U.S. output in 2018 would mean “attempts by OPEC to tighten the market may not be successful.”
OPEC meets on Nov. 30 to discuss policy, with Saudi Arabia lobbying for extending cuts that are due to expire in March.
Nevertheless, prices continue to find some support from a drawdown in commercial fuel inventories in the United States.
U.S. stocks fell 1.9 million barrels in the week to Nov. 17, to 457.14 million barrels. Stocks have dropped 15 percent from record highs in March to below 2016 levels.
“Lower supplies into the U.S. from the north and robust exports from the south are likely to support a further reduction in U.S. inventories,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Source: Reuters (Reporting by Henning Gloystein; Editing by Edmund Blair)