Futures Movers: Oil prices finish lower as U.S. crude supplies post weekly rise of nearly 8 million barrels

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Oil futures finished lower on Wednesday after U.S. government data revealed that domestic crude supplies rose for a second week in a row, by nearly 8 million barrels.

The build of 7.9 million barrels in crude supplies, along with build of 1.7 million barrels at the U.S. trading hub in Cushing, Okla. “will temper the recent strength in crude-oil prices,” said Tariq Zahir, managing member at Tyche Capital Advisors.

“Several events over the next few weeks will impact energy prices, with the upcoming OPEC meeting [in December] and the outcome of the China-U.S. [trade] talks,” he told MarketWatch.

Against that backdrop, West Texas Intermediate crude for December delivery CLZ19, -1.21%  fell by 88 cents, or 1.5%, to settle at $56.35 a barrel on the New York Mercantile Exchange.

January Brent crude BRNF20, +0.23% dropped $1.22, or 1.9%, to $61.74 a barrel on ICE Futures Europe, following a 1.3% rise a day earlier for BRNF20, +0.23% the global benchmark.

The Energy Information Administration on Wednesday reported that U.S. crude supplies climbed by 7.9 million barrels for the week ended Nov. 1. Crude supplies were forecast to increase by 2.7 million barrels, according to analysts polled by S&P Global Platts. The American Petroleum Institute on Tuesday reported a rise of roughly 4.3 million barrels.

The EIA data also showed supply declines of 2.8 million barrels for gasoline and 600,000 barrels for distillates. The S&P Global Platts survey showed expectations for supply decreases of 2.4 million barrels for gasoline and 1 million barrels for distillates.

On Nymex, December gasoline RBZ19, -2.78%  rose 1.1 cents, or 0.7%, to $1.6746 a gallon, while December heating oil HOZ19, -1.26%  settled at $1.9278 a gallon, down 2.9 cents, or 1.5%.

December natural gas NGZ19, -1.12%  fell 3.4 cents, or 1.2%, to $2.828 per million British thermal units, following gains in each of the past three sessions. On average, analysts polled by S&P Global Platts expect the EIA on Thursday to report a weekly increase of 39 billion cubic feet in U.S. natural-gas supplies.

Investors also digested a report that Saudi Arabia is set to push the OPEC to make deeper oil production cuts pressuring laggard members ahead of its state-run oil company’s massive initial public offering, which could value its Saudi Aramco at $4 trillion.

Read: Saudi Aramco finally launches long-awaited mega-IPO

Check out: Here’s what investors need to know about the long-awaited Saudi Aramco IPO

However, Bloomberg News, citing delegates across OPEC+, which includes OPEC and allied producers, reported that the biggest producers in the group won’t push for deeper oil supply cuts when they meet next month. The delegates said they are more likely to stick to their current output targets and encourage producers to comply more fully with those targets.

Tyche Capital Advisors’ Zahir said he doesn’t expect the market to see a further cut in production during the OPEC meeting. “The last thing OPEC wants is to give a second wind to shale producers here in the U.S.,” he said.

Read: Producers are putting the brakes on the shale boom—here’s what that means for oil prices

Still, talk of further OPEC cuts may mean that the cartel sees the threat from U.S. shale as “diminishing,” said Phil Flynn, senior market analyst at Price Futures Group.

“Shale has been the nemesis of OPEC over the past five years, after all-time highs in domestic U.S. production prompted the cartel to cut output to keep global prices stable,” he said, in a daily note. “But U.S. producers are now under pressure to trim spending and return profits to shareholders through dividends and share buybacks.”

Meanwhile, the trade war between China and the U.S. has rattled expectations for energy demand and helped to depress energy prices, along with rising production in the U.S.

For now, there appears to be “enough US-China trade deal optimism baked into the markets to keep oil’s month-to-date advance largely intact,” said Han Tan, market analyst at FXTM. “Oil’s outlook remains contingent on US-China trade talks progressing well over the course of November, whereby a signed deal would restore some measure of global demand as economic and trade conditions recover.”