Oil futures edged lower on Tuesday, holding below $50 per barrel, their second straight session of losses as traders grew concerned that the increase in non-OPEC oil production would either prevent OPEC from ratifying its output cut agreement, or at the very least, render the organization’s planned, modest output cut ineffective at balancing the oil market.
OPEC announced that the organization could move to modestly cut oil output at its official meeting in November. However; the planned output cut is small, and even if it is ratified it may have only a negligible impact on oil prices. At the same time, recent data showed that Russian oil production is surging, while the number of active rigs in the US continues to increase.
On Tuesday, OPEC’s secretary-general dismissed fears that Russia would thwart a potential OPEC deal, saying that the country has been willing to cooperate with the organization. Investors; however, are not buying this. Russian President Vladimir Putin said he is willing to work with OPEC, but Russia’s largest independent oil producer, Rosneft has not been as willing to cooperate.
Meanwhile, traders are gearing up for the latest US oil inventory data. The American Petroleum Institute will release its inventory data later Tuesday, while the more highly regarded Energy Information Administration’s inventory report is due Wednesday morning at 10:30 a.m. EST. Analysts polled by S&P Global Platts expect that crude oil stockpiles have risen by 2.5 million barrels in the prior week. They expect a 1.6 million barrel decline in distillates. Last week, after multiple straight weekly declines oil inventories in the US rose; but distillates declined. Oil inventory increases are typical this time of year due to low seasonal demand for gasoline and refinery maintenance season.
At last check, WTI oil futures were down 0.02% at $49.93 a barrel.