Oil prices remain lower after OPEC report

Crude-oil prices held to losses Thursday on the heels of a monthly oil report from the Organization of the Petroleum Exporting Countries and as investors continued to fret about oversupply.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF6, -0.19% shed 9 cents, or 0.3%, at $37.06 a barrel. January Brent crude LCOF6, +0.40% on London’s ICE Futures exchange struggled to stay positive, up 12 cents to $40.25 a barrel.

OPEC’s monthly report revealed total production rose in November by 230,100 barrels a day from October, to 31.695 million barrels a day, largely due to higher output from Iraq.

The cartel cut its 2016 estimates for non-OPEC output by 250,000 barrels a day to average 57.14 million barrels a day, noting that U.S. shale-oil production has been falling since April. OPEC said that process should speed up, notably due to the sharp fall in oil prices.

The report is the first since the cartel last week decided to raise its production ceiling to 31.5 million barrels of oil a day, to reflect the “current actual production,” a move that sent oil prices tumbling. Analysts had expected the cartel to keep its production cap at 30 million barrels a day.

Oil prices had been higher earlier in the session after the U.S. government said crude stockpiles fell by more than expected last week, but had turned lower before the OPEC report.

On Wednesday, the Energy Information Administration said U.S. crude-oil inventories fell 3.6 million barrels in the week ended Dec. 4, snapping a streak of 10 consecutive weeks of increases. However, inventories remain at levels unseen in 80 years at 485.9 million barrels.

Official figures show stockpiles of U.S. distillates, including heating oil and diesel fuel, grew sharply by 5 million barrels last week and are in the upper half of the average range for this year. That growth in distillates inventories overshadowed the drop in crude inventories.

The surge in refined petroleum product is a result of refiners taking advantage of low crude prices, which have dropped nearly 40% since a year ago when OPEC opted to maintain output levels in the face of falling prices to defend market share.

Victor Thianpiriya, an energy analyst at ANZ Research, said although global refining margins are still considered healthy and robust, they have been on a downtrend in the past six months.

“The market is concerned the same pattern of oversupply outpacing demand could repeat in the refined product sector, but not in the imminent future,” he said, noting strong gasoline demand.

Nymex reformulated gasoline blendstock for January RBF6, +4.74% — the benchmark gasoline contract--rose 3 cents, or 2.8%, to $1.266 a gallon.

ICE gasoil for December changed hands at $363.00 a metric ton, down $0.25 from Wednesday’s settlement.