Crude on track for monthly loss on supply glut worries

Investing.com-- Oil prices edged higher Friday, but were on track for monthly losses, weighed by a stronger dollar following hawkish-leaning signals from the Federal Reserve as well as concerns of rising supply from major producers.

At 08:40 ET (12:40 GMT), Brent oil futures for December gained 0.3% to $64.54 a barrel and West Texas Intermediate crude futures rose 0.4% to $60.81 a barrel.  

Both Brent and WTI contracts are set to lose between 3% and 3.5% in October, their third consecutive month of declines. 

Strength in the dollar weighed on oil and other commodities priced in the greenback, after the Fed cut interest rates as expected but downplayed expectations for another cut in December.

Crude hit by predicted supply glut

Oil prices have been battered of late by concerns over a looming supply glut, especially as the Organization of Petroleum Exporting Countries and allies, a group of top producers known as OPEC+, steadily ramped up production in recent months.

The group is set to meet on Sunday and will agree to a 137,000 barrels per day production hike, Reuters reported earlier this week.

The hike will likely take effect from December, and comes after the cartel agreed to raise production by a similar level in November.

OPEC+ hiked production by a total of over 2.7 million barrels per day this year, as the cartel sought to offset the impact of lower oil prices by increasing output and capturing a greater share of the market. 

Data this week showed oil exports from OPEC+ leader Saudi Arabia soared to a six-month high of 6.407 million barrels per day in August. 

Chinese business activity weakens

Traders also priced some risk premium out of oil after Israel and Hamas agreed to a U.S.-brokered ceasefire, although the treaty still appeared tenuous. 

Additionally, concerns over the U.S. economy, amid a prolonged government shutdown, weighed on oil, especially as federal worker furloughs disrupted air travel across the country. 

Weak Chinese business activity data added to oil’s woes, as manufacturing activity in the world’s biggest oil importer shrank for a seventh consecutive month. 

Limited optimism over a U.S.-China trade deal, coupled with skepticism over more U.S. sanctions against Russia, also pressured oil prices. 

"Clearly, the price action suggests that the market is not convinced that we will lose a significant amount of Russian oil supply," said analysts at ING, in a note.

The "meeting between President Trump and President Xi only served to strengthen this conviction, with Russian oil flows to China apparently not part of broader talks between the two leaders. This is important for the market given that China imports around 2m b/d of Russian oil. It’s the only buyer that could meaningfully increase its purchases if India reduced its imports of Russian crude."

Ambar Warrick contributed to this article