Oil halted gains below $50 a barrel as investors weighed falling U.S. stockpiles against speculation the recent price rally will encourage producers to raise output. Futures declined as much as 0.8% after advancing 2.3% Wednesday to the highest close in more than three months. U.S. crude stockpiles last week fell below 500 million barrels for the first time since January, according to government data. The market is set to remain oversupplied in 2017 and prices will stall at $55 a barrel as shale drillers get back to work. Oil has gained about 11 percent since the Organization of Petroleum Exporting Countries agreed last week to cut production for the first time in eight years. OPEC, which pumped at a record in September, will decide on quotas at an official meeting of the group in Vienna on Nov. 30.
There is a bit of a cap for oil at about $50 because above that level, once we head up toward $55 a barrel, there’s concerns that U.S. shale producers will jump back into action. The positive momentum has brought oil prices back to the top of the trading range.
Global oil markets are set to remain very oversupplied amid the return of disrupted output in Nigeria and Libya, resilient U.S. shale production and the start of major projects commissioned over the past 10 years, Goldman’s Currie said in a Bloomberg television interview.
OPEC members will meet next week for talks on implementing an output cut deal, with Russia joining to discuss how producers from outside the group can participate in the plan, according to Venezuela’s oil minister.