Oil slips as pessimism over supply resurfaces despite OPEC pledge

Oil dropped again on persistent fears that a surplus will re-emerge next year despite OPEC's plans to cut production.

The unexpected resurgence in Iranian oil imports due to the waivers has helped push spot prices for Middle East crude and condensate to their lowest in more than a year.

Though it is nearly certain that the group will resort to a production cut, the exact quantum of cut will be decided only at the meeting.

Oil prices have been rising steadily since May after the United States announced its decision to exit the Iran nuclear deal and re-impose tighter sanctions on Tehran's oil exports. The global benchmark crude traded at a $10.01 premium to WTI for the same month. We'll see if it is right after the next OPEC meeting on December 6.

- USA crude oil output has risen by nearly 25% this year, to a record 11.7 million barrels per day (bpd). West Texas Intermediate crude oil for January delivery briefly fell below $53 a barrel Tuesday.

While Saudi Arabia's Energy Minister Khalid al-Falih says that based on the OPEC+ group technical analysis, "there will need to be a reduction of supply from October levels approaching a million barrels", reports emerged last week that Russian Federation would rather stay out of any fresh oil production cuts led by the Saudis.

Despite that, markets remained wary amid deep trade disputes between the world's two biggest economies, the USA and China, after the pair could not find a solution to their spat at the Asia-Pacific Economic Cooperation (APEC) at the weekend. Total volume traded was about 5 percent below the 100-day average.

Even less confident in OPEC's proposed strategy was Fatih Birol, executive director of the International Energy Agency: at a news conference in Bratislava, he said the crude market is now well supplied but spare capacity in Saudi Arabia is thin, and therefore cuts by key players could tighten markets.

In other news, USA energy firms added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015, according to energy services firm Baker Hughes.

OPEC ministers are scheduled to meet in Vienna on December 6, with their allies from outside the group joining them the next day. US crude production has been rising, hitting a record in the week ended November 9, according to government data.

Despite today's sharp downward trend, some analysts think that prices are set to regain ground over the next month, based on the trends from past such oil price slumps. Meanwhile, the world's top producers - the United States, Russia and Saudi Arabia - have been pumping at or near records.

The Organization of the Petroleum Exporting Countries, led by Saudi Arabia, is pushing for the group and its partners to reduce output by 1 million to 1.4 million barrels per day to prevent a build-up of unused fuel.