Oil falls over 3% as OPEC fails to reach output deal

Oil futures fell over three percent in American trade with US crude and Brent falling off November 22 highs, shrugging off a steep decline in US crude stocks, which snapped the longest stretch of inventory buildup since mid-2015. 

OPEC's official meeting in Vienna was wrapped up without a final deal to extend output cuts into 2019, confounding market expectations of a deal to cut output by 500 thousand to 1.5 million bpd, with negotiations expected to continue tomorrow. 

As of 07:05 GMT, US crude futures due in January fell 3.18% to $51.21 a barrel, while Brent February futures slumped 3.25% to $59.56 a barrel, as the dollar index dropped 0.37% to 96.71 off week highs. 

Saudi oil minister Khalid Al Falih said the current option is to cut output by one million bpd, adding he hopes Russia to contribute as much as possible into production cuts, while expressing confidence in reaching a deal tomorrow. 

Russian energy minister said Russia couldn't output in Winter more than other countries due to climactic and geological reasons, adding they will focus on actual indicators in the markets when reaching a final decision rather than tweets. 

US Inventory Decline

The Energy Information Administration reported a US crude inventory deficit of 7.3 million barrels in the week ending November 30, considerably past estimates of a 1.3 million decline, with total stocks now down to 443.2 million barrels, still 6% above five-year averages. 

Gasoline stocks are up 1.7 million barrels, making them 4% above averages, while distillate stocks, including heating fuel, rose 3.8 million barrels, still 5% below averages.

US Data 

The US private sector added 179 thousand in November, missing estimates of 195K, and compared to 225K in October, revised from 227K. 

US productivity rose 2.3% as expected, up from 0.9% in the second quarter, while labor costs rose 0.9%, slowing down from 1% in the second quarter. 

US trade deficit widened to $55.5 billion from $54.6 in September, missing estimates of $55.2 billion, while unemployment claims fell by 4 thousand in the week ending December 1 to 231K. 

Continuing claims for the week ending November 24 fell 74 thousand to 1.631 million.

The US services PMI rose to 60.7 in November from 60.3 in October, besting estimates of 59.1. 

Two thirds of American GDP relies on services, hence the vital importance of services PMIs to markets. 

Finally, factory orders fell 2.1% in October, compared to a 0.2% increase in September, and missing estimates of a 1.9% increase. 

Iran Sanctions 

Otherwise, as US sanctions went into effect on Iranian oil exports starting November 4, eight countries were granted waivers for 180 days, mainly China, India, South Korea, Japan, Italy, Greece, Taiwan, and Turkey, already the largest importers of Iranian oil. 

Prices hit 13-month lows recently on renewed concerns over a supply glut as global producers pump record amounts of crude while global demand weakens.