Oil prices pulled back Monday as doubts arose over whether a meeting of global crude producers next week would result in an extension of output cuts.
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Light, sweet crude for December settled down 46 cents, or 0.8%, to $56.09 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, declined 50 cents, or 0.8%, to $62.22 a barrel.
The Organization of the Petroleum Exporting Countries and other producers including Russia are scheduled to meet Nov. 30 and review whether to extend the production cuts due to expire in March 2018. The deal aims to reduce a glut of global stocks to their five-year average.
While Saudi Arabia has expressed its dedication to extending the agreement, investors are less sure of Russia's commitment as a major participant outside of the cartel.
"There seems to be some equivocation by the Russians about extending the OPEC deal," said John Kilduff, founding partner at Again Capital. "With the door being left open, you're seeing the market take a hit on a potential unraveling."
Oil prices have rallied to two-year highs in recent months, aided by increased geopolitical tensions in major oil-producing nations including Saudi Arabia, and expectations of an extension to the cuts.
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"We're expecting a potential extension of the deal, that's the general market consensus, OPEC knows that it needs to continue doing what it's doing because its targets haven't been reached," said Mustafa Ansari, energy economist at development bank Arab Petroleum Investments Corp.
Analysts warn that since oil has already priced in an extended reduction of OPEC output, any disappointing news could lead to a sharp drop for prices.
"With many market participants anticipating a full year 2018 extension of the 1.8 mb/d output cut, anything less could easily produce a selloff sequel to the May meeting meltdown," RBC Capital Markets analysts said Monday. "The stakes for this meeting are high indeed and it is a 'Go Big or Go Home' event in our view."
As U.S. shale production has increased and crude stockpiles have built up in recent weeks, the possibility of more U.S. supply also dampened market sentiment.
"Even if they [OPEC] do extend the deal, I don't see too significant a price rise because the market understands even more than ever before that shale production can respond immediately," Mr. Ansari said.
Baker Hughes reported Friday the number of U.S. rigs drilling for oil was unchanged at 738, having risen by nine the previous week.
Gasoline futures fell 0.05% to $1.7438 a gallon and diesel futures lost 0.7% to $1.9321 a gallon.
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(END) Dow Jones Newswires
November 20, 2017 17:07 ET (22:07 GMT)