Oil Sheds Gains on OPEC Flip-Flop Sentiment as Sunday Meeting Looms

Meanwhile, crude stocks in the U.S. may have declined again: File Image/Pixabay

While traders in the previous session caused a 2 percent rise in oil prices on the expectation the Organization of the Petroleum Exporting Countries (OPEC) would keep voluntary cuts in place, on Wednesday they eliminated the gains on fears the cartel would raise production after all.

Wednesday's sell-off was triggered by two sources familiar with the matter telling media that OPEC would consider further raising production in October to regain market share when the cartel meets on Sunday.

As of 1811 GMT, Brent fell $1.60, or 2.3 percent, to $67.54 per barrel, and West Texas Intermediate fell $1.68, or 2.5 percent, to $63.91 per barrel.

However, many analysts still expected OPEC to keep output unchanged, because of U.S. and European sanctions against Russia and Iran rendering those countries unable to expand their crude production capabilities.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, said,  "OPEC has clearly shifted course this year, and while I don't dismiss their interest in capturing market share or aligning with [U.S. president Donald] Trump, they risk flying too close to the sun by rolling back cuts into seasonally softer demand," and she added that her base case is that OPEC won't boost output further at this stage.

Meanwhile, possible oil trading influencers later this week included a Wall Street Journal survey concluding that U.S. crude inventories are expected to have fallen for a third consecutive week, along with declines in product stocks due to refineries running at a slower rate.

Commercial crude stocks are estimated to have fallen by 2 million barrels, to 416.3 million barrels, in the week ended Aug. 29, while gasoline inventories are forecast to have declined by 1.3 million barrels, at 221 million barrels, in a seventh straight weekly drop.