Oil drops after US production reaches new record and stocks increase

NEW YORK (Reuters) – Oil prices fell on Wednesday, continuing a dip after US crude oil production rose to a new high and domestic stocks rose more than expected.

In early trading, prices had risen after a report that Russia and Saudi Arabia were discussing the opportunity to reduce crude oil production next year. Next, the US Energy Information Administration announced that domestic crude inventories had risen by 5.8 million barrels over the last week, more than double the analysts' expectations.

Gross production reached 11.6 million bpd, a weekly record, but analysts will see if the monthly data confirm it.

The US CLc1 crude futures contract fell 65 cents to 61.57 dollars per barrel at 11:17 EST (16:17 GMT). This represents a drop of nearly 20% from a high of $ 76.41 per barrel in early October.

"The market has not yet proved that it could withstand a rally, so the short-term mood is still very negative," said Phil Flynn, an analyst at Price Futures Group in New York. Chicago.

Brent crude LCOc1, the global benchmark, lost 49 cents to 71.64 dollars a barrel.

While Iranian oil exports are expected to fall after the entry into force of US sanctions on Monday, OPEC and other forecasters have indicated that the global oil market could be in surplus by 2019 due to the slowdown in demand.

Russia and Saudi Arabia, the main producers of an OPEC-led alliance, have begun bilateral talks on a return to production cuts next year, the Russian news agency TASS reported, citing a unidentified source. In June, the group of producers decided to soften the production limits in place since 2017, under pressure from US President Donald Trump.

According to analysts, these countries may be more willing to reduce their production now that the mid-term elections in the United States are over. Trump, whose Republican party was fighting to retain control of Congress, complained of rising gasoline prices.

"The OPEC was feeling the pressure of Trump but the producers acted thinking that they just needed to pass the US election," said Wednesday in a note Joe McMonigle, an analyst at Hedgeye in Washington . "We plan to hear public comments from OPEC ministers this weekend" about the reduction of the recent increase in production.

A ministerial committee composed of members of the Organization of Petroleum Exporting Countries and Allies meets Sunday in Abu Dhabi to discuss prospects for 2019.

The supply from countries such as Saudi Arabia has risen sharply since June. In addition, Washington has granted waivers to its sanctions on Iran to eight oil customers of this major supplier.