A lightning fast rally in oil prices is reversing. Here's why

By Henning Gloystein

Brent crude oil was down 14 United States cents a barrel at US$61.73 by 1038 GMT.

USA crude oil production hit a record of 9.65-million barrels a day, meaning output has risen by nearly 15% since their most recent low in mid-2016. The EIA data encouraged buying at session lows.

"Oil shrugged off an unexpected rise in the USA crude inventory data...." Increased refining rates could eventually reduce crude inventories.

US West Texas Intermediate (WTI) traded at $55.18, at against its trading price of $57.30 on November 7.

WTI light sweet crude oil was down 60 cents at USD55.15 a barrel. Both crude benchmarks hit two-year highs last week.

"It's started to look like there's a little bit too much momentum, and the quality of the buyer coming into the market at the $56 to $57 level wasn't the smartest crude oil money", said Richard Hastings, macro strategist at Seaport Global Securities in Charlotte.

First, the International Energy Agency revised down its oil demand growth estimates for this year and next, by 100,000 bpd in each case, now expecting oil demand growth this year to average 1.5 million bpd, which will next year slow down to 1.3 million bpd.

"Oil is already facing stiff competition from ever-cheaper and more environmentally friendly energy sources as traditional fossil fuel users switch to cleaner, low-carbon alternatives", IEA said in its World Energy Outlook 2018. Recent weekly figures show USA drillers are pumping near all-time high levels.

Oil prices steadied on Thursday as traders looked ahead to the OPEC meeting at the end of this month, when producers are expected to extend output cuts, sheltering prices from the impact of rising U.S. crude production and inventories.

While speaking at the Abu Dhabi International Petroleum Exhibition Conference (ADIPEC), the Secretary-General, Organisation of Petroleum Exporting Countries (OPEC), Mohammed Barkindo said countries did not have to worry about oil reaching its peak demand until 2040.

OPEC meets on November 30 and is expected to agree an extension to its output cuts.

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