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Oil Futures Hit Six-Week Lows amid Six-Session Losing Streak

November 4, 2016 at 17:40 by Andrew Moran

Oil futures have plummeted to six-week lows amid a six-session losing streak. The dip in oil prices comes as traders attempt to disseminate the plan being presented by the Organization of the Petroleum Exporting Countries (OPEC). Oil was also impacted by the increase in the US rig count.

December West Texas Intermediate (WTI) crude futures tumbled $0.67, or 1.50%, to $43.99 per barrel at 17:10 GMT on Friday on the New York Mercantile Exchange. US crude has not traded this low since the middle of September. It is also poised for a weekly loss of just under 9%, which is the biggest weekly fall since January.

Brent crude also saw declines to finish off the trading week. January Brent crude futures fell $0.85, or 1.83%, to $45.50 a barrel on London’s ICE Futures exchange. The last time Brent crude traded this low was early September. Brent crude is also set to settle for the week down more than 7%.

Although oil prices have been on a downward trend for the past month, 2016 has still be a stellar year for both US and Brent crude. Since hitting a 12-year low in February, oil prices have climbed approximately 70% so far this year.

The reason for oil’s decline on Friday is due to conflicting reports regarding OPEC’s plan to implement a cap on production efforts. In September, during an informal meeting in Algeria, OPEC members agreed to cap the group’s output levels at between 32.5 million and 33 million barrels per day (bpd). Since then, some nations, such as Iran, Iraq, and Libya, are beginning to somewhat backpedal on the deal.

For now, it still appears that OPEC will complete and ratify the pact at the next OPEC meeting on November 30 in Vienna. Until then, traders will be biting their nails in anticipation.

Meanwhile, the US oil rig count continued its upward trend. After its first decline in about four months last week, US drillers added nine rigs over the past seven days for a total of 450. This is lower than the same time last year, when there were 572 rigs in operation.

As oil output stays close to all-time highs and inventories remain high, many investors are concerned that the global demand is not there to sustain the industry’s growth. In the third-quarter, demand growth was less than 30% compared to the same time a year ago, which is roughly one million bpd.

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