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Oil prices shed early gains amid doubts over OPEC output cut

By Jane Chung and Keith Wallis | SEOUL/SINGAPORE

Oil prices erased early gains to trade almost flat in Asian session on Thursday on mixed U.S. crude stocks data and doubts over OPEC’s implementation of an output cut, although a weaker dollar aided sentiment.

International Brent crude futures were trading up 2 cents at $53.02 a barrel at 0807 GMT. Prices fell to $52.81 a barrel earlier in the session.

U.S. benchmark West Texas Intermediate crude was up 3 cents at $49.80 a barrel after dropping to $49.61 earlier.

Crude oil inventories in the United States dropped 2.4 million barrels in the week that ended on Dec. 2, compared with analyst expectations for a draw of 1 million barrels.

But stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures, increased by a hefty 3.8 million barrels last week, the most since 2009, according to data from the U.S. Energy Information Administration (EIA) on Wednesday.

“Momentum continues to wane in crude with mixed EIA crude inventories data and shale producers hedging via futures,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

Oil prices have rallied since the Organization of Petroleum Exporting Countries (OPEC) and Russia reached a landmark agreement last week to cut production to erode a global supply overhang and prop up prices.

The U.S. dollar index fell as Treasury bond yields eased and as investors eye next week’s Fed meeting.

“A slightly weaker U.S. dollar is supportive of oil prices,” Michael McCarthy, chief market strategist at Sydney’s CMC Markets said. A weak dollar makes dollar-denominated oil less expensive for importing countries.

Oil prices initially rose on Thursday, supported by upbeat investor sentiment on the underlying strength in the U.S. economy, McCarthy said.

But doubts remain over whether OPEC will be able to comply with output cuts and whether those curbs will be enough to rebalance markets.

“Talk about OPEC compliance worries is a bit of a red herring. As in the past, OPEC compliance/non-compliance is a known unknown. What the crude rally really needs is new news to reinvigorate a speculative market already positioned long,” added Halley.

OPEC and non-OPEC oil producers will meet again this weekend in Austria’s capital to discuss the details of last week’s agreement, which aims at an overall reduction in output of around 1.5 million barrels a day.

“Oil markets might see a pick-up in volumes as we enter the European trading session,” McCarthy added.

China’s crude oil imports rebounded strongly in November from the previous month and were up 18 percent on a year ago, while exports of refined fuel hit a record high as refiners rushed to ease an expanding domestic surplus.

(Reporting by Jane Chung and Keith Wallis; Editing by Richard Pullin and Subhranshu Sahu)

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