Oil prices fell over doubts on output cut agreement

Oil prices fell on Monday over doubts that an OPEC-led plan to cut output would rein in a global oversupply that has dogged markets for over two years. They are nearly double their lowest level this year in January, with benchmark North Sea Brent futures ending last week at about US$52 per barrel.

West Texas Intermediate (WTI) for November delivery rose 1.22% to $50.44 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) plans to agree on an output cut by the time it meets in late November. The targeted range is to cut production to a range of 32.50 million barrels per day (bpd) to 33.0 million bpd. The group, which controls more than one third of the world’s oil production, said it also wants the participation of non-OPEC producers in a concerted efforts to curb production.

"Even with the apparent 'cut' that was agreed, we are still in an oversupplied market… (and) with the US rig count seeing an increase of 35 percent since May 2016 we are in real danger of being on the edge of another big correction," said Matt Stanley, a fuel broker at Freight Investor Services in Dubai.

To clean up doubts over the issue, OPEC officials will be on meetings in the six next weeks, starting in Istanbul this week. However, analysts cautioned about too high expectations about the talks.

Barclays Bank said it expected "Stockdraws during the upcoming winter season will support physical oil… irrespective of any decision in November in Vienna. We expect that prices will rise to the low $50 per barrel range in Q4".