Oil falls to below $56 on signs of higher output

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US crude was down $1.07 at $50.60.

US crude inventories fell by 4.08 million barrels last week after an unexpected draw of 0.76 million barrels the previous week, according to the latest American Petroleum Institute (API) inventory data for the week ending September 29. Brent was also down 0.3% to $55.82. However, total motor gasoline inventories increased 1.6 million barrels last week, and are in the upper half of the average range. Distillate stockpiles, which include diesel and heating oil, fell by 2.6 million barrels, versus expectations for a 1.8-million-barrel drop. The API reported a big 4.079 million barrels drop in crude supply that would normally offset the gas number which should, at this time of year, build in Cushing Oklahoma, the WTI delivery point increased by a whopping 2.084 million barrels.

"A wide price premium of Brent over WTI crude has boosted appetite for USA oil globally, which was reflected in the rise in exports", said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.

Crude-oil prices traded slightly lower early Wednesday, threatening to decline for a third session in a row and record their longest string of declines since the three-session period ended August 30, amid worries that OPEC is not fully complying with a key production-cut agreement. Chevron (CVX) was also down 0.1% to 117.73.

Oil prices are also affected by the strengthening of United States dollars, which contributes to the appreciation of oil for holders of other currencies.

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During September, OPEC as a whole added 120,000 barrels a day, not a destabilising amount, led by increases from the Saudi kingdom, Kuwait, Libya and Nigeria, according to a Bloomberg News survey.

Following a meeting in Vienna in September, OPEC and Russian Federation said they were about halfway toward clearing the global glut and urged fellow producers to stay focused and finish the job, while stopping short of announcing additional action. Gains in rig counts, which measure exploration and production activity, usually indicate drillers are returning to work on improved market metrics.

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