Picture: REUTERS
Picture: REUTERS

London — Oil prices slipped further on Friday as swelling inventories depressed sentiment despite widespread expectations that Opec and Russia would agree some form of production cut next week.

Both international oil benchmarks, North Sea Brent and US light crude, have had their weakest month for more than 10 years in November, losing more than 20% as global supply has outstripped demand.

Brent was down 55c at $58.96 a barrel by 10.15am GMT, while US crude was down 75c at $50.70. Both contracts have made small gains this week, their first weekly rise in almost two months.

Surging oil production in the US, Russia and by members of the Middle East-dominated Opec countries has helped fill global inventories and create a glut in some markets.

A slowdown in oil demand growth is compounding the emerging oversupply.

“Near-term oversupply has gutted Brent prices,” said Jason Gammel, analyst at US investment bank Jefferies, adding that there was “an increasing urgency to move crude into storage”.

This move is visible in the Brent forward price curve, which now has prices for future delivery above those for immediate dispatch, a structure known as “contango”, which can make it attractive to put oil into storage for later sale.

To rein in the glut, Opec and its main partner Russia are discussing supply cuts and are due to meet in Vienna on December 6 and 7 to agree on a production strategy.

“The next Opec meeting is going to prove a pivotal moment for the direction of oil prices in 2019,” BNP Paribas strategist Harry Tchilinguirian told Reuters Global Oil Forum.

“A decision will have to be made against a background of strong US shale oil supply growth, and for now, weaker expectations on global oil demand growth.”

Before the Opec meeting, the world’s top three producers — the US, Russia and Saudi Arabia — will be part of a meeting this weekend of the Group of 20 industrialised nations in Buenos Aires, Argentina.

Oil inventories are rising fast in the US, where commercial crude stocks rose by 3.6-million barrels in the week to November 23 to 450.49-million barrels, according to the Energy Information Administration (EIA).

US crude production is at a record high of 11.7-million barrels a day.

Crude reserves increased 6.4-billion barrels, or 19.5%, to 39.2-billion barrels at the end of 2017, marginally higher than the previous record of 39-billion barrels set in 1970, the EIA said.