Oil down 1 percent on OPEC worry, offsetting U.S. inventory fall

(This version of the October 26th story corrects paragraph 10 to remove Venezuela from countries expected to be exempt from oil cartel production cut)

A worker walks past a drilling rig at a well pad of the Rosneft-owned Prirazlomnoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. REUTERS/Sergei Karpukhin/File Photo

NEW YORK (Reuters) - Oil settled down more than 1 percent on Wednesday even after a surprise drawdown in U.S. crude inventories, as traders remained cautious that OPEC would be able to cut production come late November.

U.S. crude stockpiles fell 553,000 barrels last week, the U.S. Energy Information Administration (EIA) said, compared with the 1.7 million-barrel build analysts polled by Reuters forecast. [EIA/S]

Crude inventories in the world’s largest oil producer have fallen unexpectedly in seven of the past eight weeks, bucking the usual autumn trend in which stockpiles rise as refineries go into maintenance season.

Oil prices pared losses after the EIA data, with U.S. crude briefly trading in positive territory and Brent returning above $50 a barrel. But the rebound was limited by doubts about whether the Organization of the Petroleum Exporting Countries (OPEC), which meets Nov. 30 in Vienna, will succeed in its planned production cut.

“The focus point from here remains on the OPEC meeting that comes a month from now, with Iran, Libya and Nigeria all looking unlikely to commit to output cuts,” said Tariq Zahir, crude trader and fund manager at Tyche Capital Advisors in New York.

Prices will likely continue falling, with WTI hitting $47 and Brent falling to $48 to $48.50 by the month’s end as the market grows skeptical about OPEC’s jawboning, said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.

“We’ve seen bullish information,” he said of the optimistic comments from some producers on OPEC’s planned production cut. “None of it is really new, so it’s one of those things when the buyers are exhausted.”

Brent crude LCOc1 was down 81 cents, or 1.6 percent, at $49.98 a barrel. It fell as low as $49.65, its lowest since Sept. 30.

U.S. West Texas Intermediate (WTI) crude CLc1 slid 78 cents, or 1.6 percent, to $49.18. Its session low was $48.87, its lowest since Oct. 4.

Iran, Libya and Nigeria are expected to be exempted from OPEC’s planned production cut, which seeks to cut about 700,000 barrels per day (bpd) from an estimated glut of 1.0 million to 1.5 million bpd.

Iraq has said it would not participate, while Indonesia’s state oil firm is targeting an output increase.

Unless non-member Russia joins, the onus of a potential cut would fall on Saudi Arabia, Kuwait and the United Arab Emirates.

Additional reporting by Amanda Cooper in LONDON and Henning Gloystein and Keith Wallis in SINGAPORE; Editing by David Gregorio, Lisa Shumaker and Chris Reese