By Neanda Salvaterra, Dan Strumpf and Timothy Puko
Oil prices are posting their biggest losses of the week Friday, extending recent declines amid a stubborn crude glut and lowered expectations for a production cut by the Organization of the Petroleum Exporting Countries.
U.S. crude for December delivery recently lost $1.05, or 2.4%, to $43.61 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost $1.02, or 2.2%, to $44.82 a barrel on ICE Futures Europe.
On Thursday the International Energy Agency reported that OPEC produced a record 33.83 million barrels a day in October. The record comes despite plans to pusha new deal for output cuts when OPEC meets Nov. 30. The goal is a cap between 32.5 million and 33 million barrels a day, but as prices have fallen in recent weeks, cutting back to that number appears less attainable.
"Everyone is pumping as much as they can right now," said Tariq Zahir, who oversees $8 million as managing member of Tyche Capital Advisors LLC. His firm has profited in recent weeks from spread bets that benefit from falling prices, he said. "Everyone is skeptical that a deal is going to be done."
The oil cartel's task of tightening the oil market is made more difficult by rival producers -- including Brazil, Canada, Kazakhstan and Russia -- all raising output, too.
Analysts estimate Russia's oil output went up by 0.42 million barrels a day in October on a year-on-year basis, but the country has signaled a willingness to cooperate on a supply action.
Russian Energy Minister Alexander Novak said on Thursdaythat Moscow could freeze crude production at November levels and said the country still prefers a freeze to production cuts, according to state news agencies.
The country has failed to follow through on similar deals in the past.
Futures contracts for later months also haven't fallen as quickly as for the near-term contracts, which keeps pressure on those near-term prices, a broker and analyst said. Demand is usually stronger in January than December anyway, dissuaded traders from buying, said Scott Shelton, broker at ICAP PLC. And there is even less incentive to buy if holding the front-month contract longer raises the risk of losing money by paying a large difference to roll December futures into January.
"The optics are bad," Mr. Shelton said.
The election of Donald Trump as the next American president has also added additional uncertainty into the oil market. Mr. Trump has pledged to loosen restrictions on U.S. oil production, which could boost output further, send prices lower and complicate OPEC's role in the oil market.
"It is thought Trump...will push to make the U.S. more self-reliant via shale fields, so negative on the outlook for oil prices if the U.S. ramps up production," said Stuart Ive, private client manager at OM Financial. "This thought could also question OPEC's resolve to cap production levels."
Earlier this week, the U.S. Energy Information Administration raised its forecast for U.S. crude output, saying production would fall slower than expected due in part to more drilling in Texas.
Later on Friday, investors will be tuning in for oil services firm Baker Hughes' weekly rig count report. The rig count is used as a bellwether for activity in the U.S. oil industry. Recent increases in the rig count from historically low numbers are already translating into rebounding U.S. production, another factor in oil's decline this autumn, said Jim Ritterbusch, president of Ritterbusch & Associates.
Gasoline futures recently lost 1.7% to $1.3154 a gallon. Diesel futures lost 2.1% to $1.4064 a gallon.
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(END) Dow Jones Newswires
November 11, 2016 11:22 ET (16:22 GMT)
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