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Oil prices dropped on Tuesday, while expectations of further increase in US output lessen the effects of the ongoing OPEC-headed production cuts aimed at tightening the market.

Brent crude futures reached $62.94 per barrel. From their last close, this represents a decrease of 22 cents, or 0.35 percent.

US West Texas Intermediate crude was at $56.62 a barrel, which presented a 0.25-percent decrease, down 14 cents.

Last week, both the crude benchmarks hit highs that were last witnessed in 2015. However, traders agreed that the market has lost momentum since then.

They also claimed that  they were careful and doubtful on betting on further price rises.

“Prices…are starting to look like a pause or pullback is needed,” said Greg McKenna, who is the chief market strategist at AxiTrader.

The aforementioned sentiment was partly caused by the increasing US oil output. The output has grown over 14 percent since the middle of 2016, reaching a record 9.62 million barrels per day.

On Monday, the US government stated that US shale production for December is set to rise for a 12th consecutive month, rising 80,000 barrels per day.

OPEC and Oil Outlook

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Fitch Ratings, in its 2018 oil outlook, said that expected 2018 average oil prices “will be broadly unchanged year-on-year and that the recent price recovery with Brent exceeding $60 per barrel may not be sustained.”

So far this year, Brent has averaged $54.5 a barrel.

On the other hand, traders expected that the ongoing supply cut, which is led by the Organization of Petroleum Exporting Countries and Russia, would likely prevent a very big fall in oil prices.OPEC and Russia have contributed to the reduction in excess supplies.

Additionally, the organization raised its oil demand forecast. It said that the world would need 33.42 million barrels per day of OPEC crude next year. That figure would be up 360,000 barrels per day from its previous forecast, marking the fourth consecutive monthly increase in the outlook since July.

In China, refiners increased crude oil processing runs to near record monthly levels in October. Their operations have increased 7.4 percent to 50.51 million tons, or 11.89 million barrels per day. The figures came from China’s statistics bureau on Tuesday.

OPEC is set to meet on November 30 to engage in talks over further output policy. The group is anticipated to extend the cuts beyond the current deadline, which will be in March next year.

Furthermore,  the International Energy Agency stated on Tuesday that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040. At present, there are only around 2 million.

This prediction is expected to cut 2.5 million barrels per day, or about 2 percent, off global oil demand by that time.

Nonetheless, the IEA’s “New Policies Scenario” expects oil prices to rise to $83 a barrel by the middle of 2020s.

Other Figures

Elsewhere in the commodities market, gold edged weaker in Asia on Tuesday due to mixed sentiments, following a weaker-than-expected retail sales and industrial output in the Asian giant.

December Gold futures on the Comex division of the New York Mercantile Exchange fell 0.13 percent to $1277.26 a troy ounce.

Overnight, gold prices rose on Monday in the middle of an uptick in safe-haven demand. This was due to the looming uncertainties among investors over the outcome of tax reform.

 

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