Oil prices fell on Thursday on profit-taking after markets rallied the previous day due to a draw in U.S. stocks and an expectation of an OPEC-led cut in production.
U.S. West Texas Intermediate (WTI) crude oil futures were trading at $51.10 per barrel at 0840 GMT, down 50 cents from their last close. International Brent crude futures were trading at $52.20 per barrel, down 47 cents.
Traders said the moves were a result of profit taking after WTI futures settled at a 15-month high the previous day, fueled by a fall in U.S. crude stocks by 5.2 million barrels in the week ended Oct. 14 to 468.7 million barrels.
“Even when factoring in hurricanes, it is difficult to write off the fact that U.S. crude stocks have drawn (fallen) by some 26.5 million barrels in the past seven weeks,” analysts at JCB wrote in a note on Thursday.
“The counterseasonal nature of the draw is also notable as we ought to be seeing builds on the back of fall refinery maintenance.”
This reduction in stocks in the world’s largest oil consumer has added to bullish sentiment that arose after the Organization of the Petroleum Exporting Countries (OPEC) proposed to cut or at least curb oil production.
While many remain skeptical about OPEC’s ability to strike and effectively implement a deal at a Nov. 30 meeting, the notion of coordination among the 14 member states has at least put a floor under Brent and WTI prices at around $50 a barrel.
“Speculative pressure is probably what is driving up prices,” said Jonathan Chan of Singapore-based Phillip Futures.
Reuters technical commodity analyst Wang Tao said U.S. oil is expected to break a resistance zone of $51.67 to $52.11 per barrel, and then rise towards $52.78. Meanwhile, Brent oil may stabilize around a support at $52.49 per barrel and then retest a resistance at $53.45.
BMI Research even said it saw “significant potential for an upwards break in Brent towards $60 per barrel… driven by bullish technical drivers and supportive conditions in the broader financial markets,” although it added fundamentals did not warrant much higher prices.
OPEC’s November meeting may agree on a half a million to 1 million barrels per day oil production cut. The producer cartel hopes non-OPEC exporters, especially Russia, will cooperate.
Saudi Arabia’s Energy Minister Khalid al-Falih said on Wednesday a cut would help reduce a huge overhang of supplies and stimulate new investments in the sector.
However, Exxon chief executive Rex Tillerson said cost cutting in the U.S. shale oil sector had made some wells profitable at as low as $40 a barrel. This means North America has effectively become a “swing producer” that can respond rapidly to a cut or unforeseen supply shortage.