Oil Tumbles as OPEC Output Hike, Shale Revival Taint Bull Market

(Bloomberg) -- Oil's bull market rally stumbled into some bad news.

Futures fell the most in more than three weeks after Saudi Arabia and at least three other OPEC nations pumped more crude last month. Meanwhile, escalating prices spurred additional U.S. exploration, a bearish signal from a production point of view. The dollar also strengthened, diminishing the appeal of commodities.

“It's coming out that OPEC's oil output rose last month, another rise in the rig count. That's all feeding in here to generating some downward pressure,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. Oil's loss also comes as “we've seen some decent dollar strength.”

Oil entered a bull market last week on signs that rising demand and production cuts by the Organization of Petroleum Exporting Countries and allies such as Russia were reducing a global surplus. Turkey's threat to halt exports of Kurdish crude also put traders on edge.

On Monday, a Bloomberg News survey of analysts, oil companies and ship-tracking data found that OPEC as a whole added 120,000 barrels a day in September, led by increases from the Saudi kingdom, Kuwait, Libya and Nigeria.

West Texas Intermediate for November delivery declined $1.09, or 2.1 percent, to settle at $50.58 a barrel on the New York Mercantile Exchange, the biggest one-day decline since Sept. 8. Total volume traded was about 22 percent below the 100-day average. Prices climbed 9.4 percent in September, the biggest monthly increase since April 2016.

Brent for December settlement fell 67 cents to end the session at $56.12 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.22 premium to December WTI.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose as much as 0.5 percent. A stronger U.S. currency reduces the appeal of dollar-denominated raw materials as an investment.

“There's a lot of crude oil in storage still and OPEC, who knows what can happen there. They've been pretty good with the compliance levels, but that can slide at any given moment,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. “This market was really over-bought. It was a nice run, but you can't just continue to go straight to the moon forever.”

Oil-market news:

• U.S. crude stockpiles probably fell by 500,000 barrels last week, according to the median estimate of analysts surveyed by Bloomberg.
• Crude stockpiles at a key storage hub in Cushing, Oklahoma, probably increased by 1.8 million barrels last week, according to a forecast compiled by Bloomberg.
• Libya's state-run National Oil Corp. lifted a force majeure on Sharara crude and gave instructions to restart production, Chairman Mustafa Sanalla told reporters in Tripoli.
• Hedge funds boosted wagers on rising Brent crude to a record and were the most bullish they've been on the U.S. oil benchmark in five weeks on signs that global demand is improving.

--With assistance from Tsuyoshi Inajima Stephen Stapczynski and Grant Smith

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Joe Carroll, Carlos Caminada