Investing.com - Oil futures tumbled to multi-month lows on Friday after OPEC reported that its crude production rose to its highest level on record and pointed to a larger surplus next year, despite an agreement to potentially cut output.
On the ICE Futures Exchange in London, Brent oil for January delivery fell to a session low of $44.19 a barrel, a level not seen since August 11. It was last at $44.75 by close of trade Friday, settling down $1.09, or 2.38%.
For the week, it logged a decline of 83 cents, or 1.8%, after posting losses in each of the past three weeks.
In its monthly market report published Friday, OPEC said that output from its own 14 members increased by 240,000 barrels per day (bpd) to 33.64 million in October, with Nigeria, Libya and Iraq blamed for the increase.
With demand for OPEC crude in 2017 expected to average 32.69 million bpd, the report indicates there will now be an average surplus of 950,000 bpd if OPEC keeps output steady. Last month's report pointed to an 800,000-bpd surplus.
The bearish report came one day after the International Energy Agency warned that the market risks running another surplus in 2017 without an output cut from OPEC.
The IEA said global supply rose by 800,000 bpd in October to 97.8 million, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.
The Paris-based organization kept its demand growth forecast for 2016 at 1.2 million bpd and expects consumption to increase at the same pace next year, having gradually slowed from a five-year peak of 1.8 million bpd in 2015.
The reports added to skepticism over the implementation of a planned deal by OPEC to limit production.
The oil group reached an agreement to cap output to a range of 32.5 million to 33.0 million barrels per day in talks held in Algeria in late September. However, OPEC said it won’t finalize details on individual output quotas until its next official meeting in Vienna on November 30.
The possibility that producers could walk away empty-handed from the November meeting looms large after Iraq, Iran, Nigeria and Libya all signaled they might not take part in the proposed production cut deal. Russia’s unclear stance is also fueling uncertainty.
Elsewhere, on the New York Mercantile Exchange, crude oil for delivery in December slumped $1.25, or 2.8%, to end the week at $43.41 a barrel. The contract dropped to $43.03 earlier, the lowest level since September 20.
Prices stayed lower after oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. last week rose by 2 to 452, the 21st increase out of the last 24 weeks.
New York-traded oil futures lost 66 cents, or 1.5%, on the week, the third straight weekly drop.
Prices were also weighed by evidence of rising crude supplies in the U.S., where weekly supply data on Wednesday showed a larger than expected build in oil stockpiles.
The U.S. Energy Information Administration said that crude oil inventories rose by 2.4 million barrels last week to 485.0 million, which the EIA considered to be “historically high levels for this time of year”.
After a historic week in which U.S. politics dominated market sentiment, investors will get back to the business of watching the Federal Reserve and economic data in the coming days as expectations mount for a December rate hike.
Meanwhile, market participants will eye fresh weekly information on U.S. stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand in the world’s largest oil consumer.
Oil traders will also pay close attention to comments from global oil producers to gauge their readiness on freezing or cutting output.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Tuesday, November 15
The American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies.
Wednesday, November 16
The U.S. Energy Information Administration is to release weekly data on oil and gasoline stockpiles.
Friday, November 18
Baker Hughes will release weekly data on the U.S. oil rig count.