Oil Falls on Production Surge
By Neanda Salvaterra and Alison Sider
Oil prices pulled back on Monday, weighed down by a strong dollar and data pointing to rising global production.
Prices have been on the rise, but gave up recent gains Monday as the rally ran out of steam.
U.S. crude futures fell $1.09, or 2.11%, to $50.58 a barrel on the New York Mercantile Exchange, their lowest settlement since Sept. 8. Brent, the global benchmark, fell 67 cents, or 1.18%, to $56.12 a barrel on ICE Futures Europe.
"There were definitely naysayers on the rally. Clearly, you can point to some things" said Michael Hiley, a trader at LPS Futures, noting rising production figures. "People are responding to breaks out of a narrow range, piling on."
Investors are growing concerned about a recent Reuters poll showing output among the Organization of the Petroleum Exporting Countries rose by 50,000 barrels a day in September as the cartel's overall compliance with its supply-cut deal fell to 86%.
"It would definitely suggest there's slippage in the agreement as far as adherence is concerned," said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy trading desk. Mr. Morton said the OPEC figures came as technical factors were already suggesting the market could be prone to a downward slide.
Several countries such as Saudi Arabia and Angola bore the brunt of the cuts while other countries such as United Arab Emirates, Ecuador and Iraq engaged in a bit of free riding, only complying by 30%, say analysts.
"Weak production discipline within OPEC and the cut exemptions for Libya and Nigeria should mean in our view that closely observed OECD stocks will not fall quite as quickly as expected," said Commerzbank analysts in a recent report.