Oil eases on bearish US inventory report, doubts over OPEC cut

NEW YORK – Oil prices eased on Wednesday on bearish US petroleum inventory data and doubts that production cuts promised by OPEC and Russia would be deep enough to end a supply overhang that has weighed on markets for more than two years. Brent futures LCOc1 were down 46 cents, or 0.9 percent, at $53.47 a barrel by 11:19 a.m. EST (1619 GMT). U.S. crude CLc1 fell 59 cents, or 1.2 percent, to $50.34 per barrel. The U.S. Energy Information Administration EIA said crude inventories fell 2.4 million barrels during the week ended Dec. 2, which was more than the 1 million-barrel draw analysts forecast in a Reuters poll. [EIA/S] Stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures, however, increased by a hefty 3.8 million barrels last week, the most since 2009, the data showed. "The report was bearish despite the overall crude oil drawdown," said John Kilduff, partner at energy hedge fund Again Capital LLC in New York, noting increases in refined products inventories. Before the EIA released its report, the market was already lower, with Brent down 0.6 percent and U.S. crude down 1.1 percent, on doubts the output cuts announced by the Organization of the Petroleum Exporting Countries last week would be enough to rebalance the market. Oil prices surged almost 20 percent after OPEC and Russia announced last week that they would cut production next year in an effort to prop up markets. Since the deal was announced, OPEC and Russia have reported record production and output elsewhere is also resilient. The EIA said on Tuesday it expected U.S. crude oil production for 2016 and 2017 to fall by less than previously expected. OPEC and non-OPEC oil producers meet this weekend in Vienna to agree details of the output cut, which targets an overall reduction of around 1.5 million barrels per day (bpd). OPEC member Nigeria, exempt from the cuts, said on Wednesday it hoped to boost its oil production to 2.1 million bpd in January, up from 1.9 million bpd now. Despite widespread scepticism, many analysts say 2017 will likely see a more balanced oil market. "Oil markets are on track to tighten over 2017, which will be accelerated by OPEC's decision to reduce production alongside non-OPEC countries," said BMI Research. "If effectively implemented, we expect the global oil market will return to balance in Q1 2017." Oil production has been outpacing consumption by 1 to 2 million bpd since late 2014. –Reuters