Oil drops in Asia on fading prospects of OPEC deal and rising US inventory

Oil prices extended overnight losses after API report showed surge in US oil inventories, while Iraq’s demand for exemption poured cold water over the optimism generated by talk of OPEC deal.

At the time of writing, WTI Oil was down 1.22% or 62 cents at $49.34/barrel. Brent oil was down 1.04% or 53 cents at $50.26/barrel.

The American Petroleum Institute (API) report released yesterday showed oil supplies surged upwards by 4.8 million barrels this week. Markets had predicted an inventory build of two million barrels of crude. The data also showed gasoline inventories rose by 1.7 million barrels.

Iraq said on Sunday that it be allowed to be exempt from production cuts should OPEC reach a deal in a month’s time in Vienna. Iraq’s comments also added to the bearish pressure around oil prices. OPEC members agreed to a collective cut of a relatively small 200,000 to 700,000 barrels per day. However, the deal is yet to be finalized and is widely expected to be passed at November meeting.