Oil prices pare gains on OPEC+ production rises

Oil prices retreated from highs hit earlier on Thursday as data showed rises in production in OPEC+ countries despite a planned production cut of 1 million barrels per day (bpd).

Brent crude futures for October, expiring on Thursday, were at $86.69 a barrel at 11:02 a.m. CDT (1602 GMT), up 0.89%, or 76 cents, after rising more than $1 earlier in the session. The more active November contract was up 56 cents, or 0.66%, at $85.80.

U.S. West Texas Intermediate crude futures for October was up 65 cents, or 0.8%, at $82.28 a barrel.

Markets seemed to look at higher-than-expected OPEC+ production as trading moved to the middle of the day, said Phil Flynn, an analyst at Price Futures Group.

“I think it took some of the wind out of their sails,” Flynn said.

Earlier on Thursday, Flynn said, the markets were reacting to U.S. government data on Wednesday that showed the country’s crude inventories (USOILC=ECI) fell by a larger-than-expected 10.6 million barrels last week, depleted by high exports and refinery runs.

Meanwhile, analysts expect Saudi Arabia to extend a voluntary oil production cut of 1 million bpd into October, adding to cuts put in place by the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a grouping known as OPEC+.

“With Brent prices having stalled in the mid-$80s … the prospect of those Saudi barrels returning to the market any time soon looks slim and the impact is increasingly being felt across the world as commercial stock levels of crude and fuel products continue to drop,” said Ole Hansen, a Saxo Bank analyst.

U.S. consumer spending increased 0.8% last month, the Commerce Department reported on Thursday, but slowing inflation strengthened expectations the Federal Reserve would keep interest rates unchanged next month.

The U.S. central bank can end its cycle of rate increases if the labor market and economic growth continue to slow at the current gradual pace, Eric Rosengren, the former president of the Boston Fed, said on Wednesday.

Weak Chinese factory data limited further gains, however.

China’s manufacturing activity shrank again in August, an official factory survey showed on Thursday, fuelling concerns about weakness in the world’s second-biggest economy.

China’s official purchasing managers’ index (PMI) rose to 49.7 from 49.3 in July, the National Bureau of Statistics said, but it remained below the 50-point level. A reading above 50 points represents expansion from the previous month.

The U.S. government on Wednesday revised down its gross domestic product growth for the second quarter to 2.1%, from the 2.4% pace reported last month, and data released separately showed private payroll growth slowed significantly in August.
Source: Reuters (Reporting by Ahmad Ghaddar Additional reporting by Jeslyn Lerh in Singapore Editing by David Goodman, Nick Macfie and Paul Simao)