NEW YORK (DTN) -- New York Mercantile Exchange oil futures closed lower Wednesday afternoon, extending losses for a second straight day amid pressure from a strong dollar and doubts the Organization of Petroleum Exporting Countries will implement its recently agreed oil production cuts after a report showed higher output by the group in September.
The U.S. dollar index rallied to a seven-month high after minutes of the Federal Open Market Committees September meeting showed Fed officials expect to raise federal funds rate relatively soon. At the Sept. 21-22 meeting, Fed officials voted 7 to 3 in favor of holding rates unchanged, but since then analysts said the chance of a December rate hike has increased to 60%.
In its Monthly Oil Market Report for October issued today, OPEC cited secondary sources in reporting its total crude production at 33.39 million barrels per day (bpd) in September, an increase of 220,000 bpd over the previous month. The report said crude supply rose mostly in Iraq, Nigeria and Libya, while Saudi Arabian supply fell.
The reported supply increase undercuts the Sept. 28 OPEC agreement to rein in production, details of which are to be announced in November. The OPEC deal that was announced in Algiers broadly required the cartel to curb its total oil production at between 32.5 million bpd and 33.0 million bpd. However, the group postponed implementation of the cuts until Nov. 30 when cartel holds its summit in Vienna.
Over the past week, OPEC has been working out specifics of the deal, including when to benchmark the output cuts and quota allocations for each member nation.
At the World Energy Congress in Turkey this week, Russia and OPEC officials committed to coordinate in implementing the cuts. Russia and Saudi Arabia are the world's biggest oil producers.
NYMEX November West Texas Intermediate crude futures settled 61 cents lower at $50.18 per barrel (bbl), off a two-day low of $49.89, bbl, and IntercontinentalExchange December Brent futures settled down 60 cents at $51.81 bbl.
In products trade, NYMEX November ULSD futures settled 2.05 cents lower at $1.5668 gallon and the November RBOB futures contract finished formal trading 2.10 cents lower at $1.4619 gallon.
Traders are now bracing for weekly oil inventory data due out at 4:30 PM ET from the American Petroleum Institute, while the U.S. Energy Information Administration is set to issue its supply data at 11:00 AM ET Thursday, each delayed a day by the Columbus Day holiday.
A survey shows the market expects U.S. crude oil inventories for the week-ended Oct. 7 to have increased by 500,000 bbl while gasoline and distillate fuel supplies are each seen down 1.8 million bbl.
EIA previously notified the trade that starting with this week's report it will no longer include crude oil stored in tanks on lease lands in the total commercial crude inventory data series. The change is expected to reduce total crude stocks by an estimated 31 million bbl.
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