Oil prices slid on Thursday, extending a decline of more than 2% in the previous session, as investors and traders look ahead to a weekend meeting of OPEC+ where producers are expected to consider another increase in output targets.
Brent crude fell 46 cents, or 0.7%, to $67.14 a barrel by 0416 GMT, while U.S. West Texas Intermediate crude fell 47 cents, or 0.7%, to $63.5 a barrel.
Eight members of the Organization of the Petroleum Exporting Countries and allies – known together as OPEC+ – will consider further increases to production in October at a meeting on Sunday, two sources familiar with the discussions told Reuters, as the group seeks to regain market share.
“Brent crude oil came under renewed pressure as OPEC+ considers releasing more barrels in (the fourth quarter). If it moves ahead, this could worsen the expected surplus, particularly during the lean demand season,” said ANZ Research analysts in a client note.
OPEC+ had already agreed to raise output targets by about 2.2 million barrels per day from April to September, in addition to a 300,000 bpd quota increase for the United Arab Emirates.
Over the past few months, despite the accelerating production increases, Middle Eastern oil prices have remained the strongest regional prices globally. This has bolstered the confidence of Saudi Arabia and other OPEC members to boost output, according to a Haitong Securities’ report.
Another factor likely driving the OPEC+ decision to increase quotas since April is to claim more market share, Vivek Dhar, an analyst at Commonwealth Bank of Australia, said in a note.
“This implies that OPEC+ are more comfortable with a lower Brent oil price” of around $60 to $65 a barrel, than their previous target of $70, Dhar said.
That means Brent futures are likely to fall into the $60-$65 range, which would push WTI to a high-$50 to low-$60 range that would challenge the economics of U.S. shale oil supply growth, he added.
Market participants are also awaiting government data on U.S. crude stockpiles later due on Thursday, a day later than usual because of a U.S. holiday on Monday.
U.S. crude stocks rose by 622,000 barrels in the week ended on August 29, market sources said, citing American Petroleum Institute (API) figures on Wednesday.
The API estimate for a U.S. build in crude stocks went against analysts polled by Reuters who estimated, on average, that U.S. crude inventories fell by 2 million barrels.
(Reporting by Sam Li in Beijing and Trixie Yap in Singapore; Additional reporting by Nicole Jao in New York; Editing by Tom Hogue and Christian Schmollinger)