New York: Oil fell about 1 per cent on Friday as players took profits on a rally over the past week that propelled prices nearly 15 per cent to four-month highs on hopes of OPEC crude output cuts.
Also weighing on the market was the steady rise in US oil drilling as crude trades at or near $50 a barrel. A closely watched report by oil services provider Baker Hughes showed US drillers adding rigs in 14 of the past 15 weeks.
Brent crude LCOc1 settled down 58 cents, or 1.1 per cent, at $51.93 a barrel. Earlier in the day, it hit $52.84 cents, three cents short of a one-year high. US West Texas Intermediate (WTI) crude settled down 63 cents, or 1.3 per cent, at $49.81.
OPEC is "back in business," determining oil prices, and only a "brave person" would bet against the cartel, an avowed oil bull, Andy Hall, said in a letter seen by Reuters to investors in his $2.5 billion hedge fund Astenbeck.
Despite Friday's drop, Brent and WTI remain up more than 10 per cent since the Organization of the Petroleum Exporting Countries wrong-footed many market participants eight days ago with its first production cut plan in eight years. For the week, Brent ended up 6 percent while WTI rose 3 per cent.
But with prices appearing to have gained too much, too soon - the Relative Strength Index for Brent and WTI was at 69 on Thursday, just below the overbought level of 70 - there was pressure to liquidate. On Friday, Brent's RSI fell to 67 while WTI dropped below 58.
"This is certainly not a one-way trade and we're seeing the other side acting now," said Tariq Zahir at Tyche Capital Advisors in New York.
"As much as the world wants to believe OPEC will cut some output, there are doubts what real good it will do to the oversupply," Zahir said.
Since OPEC proposed a production cut plan on Sept. 28 that it said will be formalised at its policy meeting in Vienna in November, it has embarked on an unusual flurry of meetings to nail down details. Next week, the group meets with Russia for informal talks in Istanbul to get non-members to contribute to cuts.
OPEC hopes to bring its own output down to 32.5 million-33 million barrels per day, reducing about 700,000 bpd from a global glut estimated by analysts at 1.0 million to 1.5 million bpd.
But the group's tendency to often max out production makes the market wary.
Any OPEC move to extend production curbs to other countries "would not make much sense," a source at Brazil's state oil company, Petrobras which produces about 2 million bpd, said on Friday....