Oil Prices Fall For Third Straight Day

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Oil prices fell Wednesday after data showed an unexpected increase in U.S. crude inventories and as major oil producing nations met to discuss a potential extension of their deal to reduce supply.

Brent crude, the global oil benchmark, dropped 0.53% to $63.27 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.53% at $57.68 a barrel.

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The American Petroleum Institute reported Tuesday that U.S. crude supplies climbed by 1.8 million barrels for the week ended Nov. 24. Official data is expected from the Energy Information Administration later Wednesday.

The supply estimate from the API added to jitters among investors who are anticipating that the Organization of the Petroleum Exporting Countries and some producers outside the cartel will extend a deal to reduce oil production.

OPEC and its allies including Russia first agreed a year ago to reduce global crude output by nearly 2% from peak October 2016 levels in an effort to boost prices.

The deal, which was extended in May, is set to expire in March, but investors are hoping for an extension through 2018. OPEC and its partners in the supply deal are expected to announce their future plans on Thursday in Vienna.

"So the stock build was quite on the bearish side," said Olivier Jakob, managing director at oil consultancy Petromatrix. "Now it's going to be all about the OPEC meeting tomorrow. It's very important to read the fine print to see if it's a true nine-month extension or not."

Brent has gained almost 19% in the last six months on the back of geopolitical turmoil and the OPEC supply action, but investors are increasingly nervous that the coalition of countries that opted to reduce output is fracturing.

Saudi Arabia, the most influential member of OPEC, is pushing for oil prices to go higher as the kingdom attempts an economic transformation.

Russia, an external producer, has signaled that it prefers a shorter agreement that factors in a possible ramp up in production by U.S. shale oil firms.

Ahead of the meeting, investors increased their net long speculative positions on crude to near record levels, say market participants.

Some analysts expect OPEC and external producers to compromise and settle on a shorter agreement even if it could upset the market.

"We expect the meeting to result in a prolongation of the current cuts, but with a decent chance of the group communicating some type of dedicated review option to increase its flexibility," said analysts for JBC Energy in a recent note.

Nymex reformulated gasoline blendstock -- the benchmark gasoline contract -- fell 0.8% to $1.75 a gallon. ICE gas oil changed hands at $428.75 a metric ton, down $3.75 from the previous settlement.

--Benoit Faucon, Summer Said and Christopher Alessi contributed to this article.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com

Oil prices fell for a third straight day Wednesday as investors became less certain that major oil producing nations will strike a deal to extend their output cuts.

U.S. crude futures fell 69 cents, or 1.19%, to $57.30 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 50 cents, or 0.79%, to $63.11 a barrel on ICE Futures Europe.

Investors are growing nervous that a coalition of countries that opted to reduce output last year to work off a supply glut is fracturing. A production cut deal between the Organization of the Petroleum Exporting Countries and other major producers, including Russia, is due to expire in March. OPEC is meeting Thursday and is expected to decide whether to continue holding 2% of global oil production off the market.

"Some people are thinking the probability of bearish news is more likely than bullish news -- the risk seems to be more to the downside," said David Leben, director of commodity derivatives at BNP Paribas.

On Wednesday, Saudi Arabia and Russia -- the world's two largest crude producers -- appeared to be at odds, with Saudi Arabia pushing for an extension through the end of 2018 and Russia advocating for a shorter agreement, according to people familiar with the matter.

Russian Energy Minister Alexander Novak said Wednesday the agreement should be extended, but declined to say for how long.

Many investors have been banking on an extension of the cuts. Ahead of the meeting, investors increased their net long speculative positions on crude to near record levels, which could make the market vulnerable to a cascading selloff if investors are disappointed.

Weekly U.S. data on stockpiles and production was also mixed on Wednesday. The U.S. Energy Information Administration reported that U.S. crude stockpiles fell by 3.4 million barrels week. Analysts surveyed by The Wall Street Journal had anticipated a 1.9 million barrel drop, while the American Petroleum Institute, an industry group. reported Tuesday that U.S. crude supplies climbed by 1.8 million barrels for the week ended Nov. 24.

But some analysts said the outlook is bearish. The drop in crude inventories may prove to be a one-off: analysts attributed it partly to the closure of the Keystone Pipeline during the week following a leak earlier this month, and TransCanada Corp. has said it has already restarted the line. That could send more oil flowing into the main storage hub in Cushing, Okla.

"A large fall in crude stocks will have cheered OPEC before its meeting tomorrow. However, the reduction in inventories was largely due to temporary disruption to imports. What's more, rising oil production and a sharp drop in demand for gasoline will make uncomfortable reading for the group," analysts at Capital Economics wrote.

U.S. producers continued to ramp up, taking advantage of oil's recent gains to push output to a fresh weekly record. Production rose by 20,000 barrels a day to 9.682 million barrels a day.

And the EIA also reported that gasoline and diesel inventories both grew last week, even as gasoline exports rose to a record 1.2 million barrels a day. Gasoline stockpiles increased by 3.6 million barrels and diesel inventories rose by 2.7 million barrels.

"We're not burning gasoline and distillate the way refiners wish," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc.

Gasoline futures fell 4.11 cents, or 2.32%, to $1.7309 a gallon -- their biggest single day decline since Oct. 6. Diesel futures fell 2.86 cents, or 1.47%, to $1.9221 a gallon.

--Benoit Faucon, Summer Said and Christopher Alessi contributed to this article.

Write to Alison Sider at alison.sider@wsj.com and Neanda Salvaterra at neanda.salvaterra@wsj.com

(END) Dow Jones Newswires

November 29, 2017 15:43 ET (20:43 GMT)