Oil price drops more than 11% in week as supply weighs

U.S. West Texas Intermediate crude for October delivery was up 31 cents, or 0.4 percent, at $71.43 a barrel by 0018 GMT, after settling up $1.27. Front-month London Brent crude, for November delivery, was down 2 cents at $79.38, having ended up 37 cents.

NEW YORK: Oil prices fell on Friday to their lowest since the third quarter of 2017, heading for losses of more than 11 percent in a week, as global oversupply kept buyers away from the market ahead of holidays over the next two weeks.

Crude has lost ground along with major equity markets as investors fret about the strength of the global economy heading into next year. The prospect of a possible government shutdown in the United States, the world's biggest oil consumer, has added to investors' worries.

Oil markets have pulled back amid concerns about oversupply, despite planned production cuts by the Organization of the Petroleum Exporting Countries.

"OPEC folks are not doing a good job of convincing the international oil community that they are going to be a strong advocate of their supply cut program," said Bob Yawger, director of futures at Mizuho in New York.

The price declines were exacerbated by thin trade and risk aversion ahead of the Christmas and New Year holidays, traders said.

Brent crude fell 53 cents, or nearly 1 percent, to settle at $53.82 a barrel, after falling during the session to $52.79 a barrel, the weakest since September 2017.

U.S. light crude oil settled down 29 cents at $45.59 a barrel, after earlier touching a session low of $45.13 a barrel.

Both contracts fell more than 11 percent in the week. Since reaching multi-year highs at the beginning of October, both crude oil benchmarks have lost more than a third of their value in their steepest decline for three years.

The big oil producers in OPEC, dominated by Middle East Gulf states reliant on energy exports, have agreed to reduce production to try to push up prices.

But those output cuts - a reduction with Russia and other non-OPEC producers of 1.2 million bpd - do not kick in until next month, and meanwhile global inventories are growing fast.

"The bear fest continues," said Stephen Brennock, analyst at London brokerage PVM Oil.

"According to OPEC's own forecasts, global oil stocks will build by 500,000 bpd in the first half of 2019. This will compound a glut in OECD commercial oil stocks."

To show its commitment to reducing supply, OPEC will release a table detailing output cut quotas for its members and allies such as Russia, OPEC Secretary General Mohammad Barkindo said in a letter reviewed by Reuters.

The proposed cut of 1.2 million bpd was an effective reduction for member countries of 3.02 percent, Barkindo said.

That is higher than the initially discussed cut of 2.5 percent as OPEC seeks to accommodate Iran, Libya and Venezuela, which are exempt from any requirement to cut.

Driving the sell-off has been sustained oversupply as the United States has emerged as the world's biggest crude producer thanks to the success of its shale industry.

The United States now pumps 11.6 million barrels per day (bpd) of crude, more than either Saudi Arabia or Russia.

U.S. energy companies added oil rigs for the first time in the past three weeks, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.

Drillers added 10 oil rigs in the week to Dec. 21, bringing the total count to 883. . This was the biggest gain in rigs since early November. - Reuters