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Oil prices continue to fall as OPEC+ considers a new output increase

Oil prices fell on Thursday, extending a drop of more than 2% from the previous session. Investors and traders are looking ahead to a meeting at OPEC+ this weekend, where producers will likely consider another increase to output targets.

Brent crude dropped 46 cents or 0.7% to $67.14 a bar by 0416 GMT. U.S. West Texas intermediate crude fell 47 cents or 0.7% to $63.5 a bar.

Two sources with knowledge of the discussions said that eight members of the Organization of the Petroleum Exporting Countries (OPEC+) will discuss further increases in production at a Sunday meeting. The group is seeking to regain its market share.

Brent crude oil is under pressure again as OPEC+ looks to release more barrels (in the fourth quarter). If this goes ahead, it could worsen the anticipated surplus, especially during the lean season," ANZ Research analysts said in a note to clients.

OPEC+ agreed to increase output targets from April to September by approximately 2.2 million barrels a day, plus a 300,000. bpd quota for the United Arab Emirates.

Middle Eastern oil has remained the most expensive region in the world despite production increases. According to a Haitong Securities report, this has boosted the confidence of Saudi Arabian and other OPEC member countries to increase output.

Vivek Dhar is an analyst with Commonwealth Bank of Australia. He said that claiming more market share was another factor driving OPEC+'s decision to raise quotas in April.

Dhar stated that "this implies that OPEC+ is more comfortable with a Brent oil price of $60 to $65 per barrel than their prior target of $70."

He added that Brent futures would likely fall between $60 and $65, pushing WTI into a range of high $50 to low $60, putting pressure on the economics behind the growth in U.S. Shale Oil supply.

The market is also waiting for government data about U.S. crude stocks, which are due later on Thursday. This is a day earlier than usual as Monday was a U.S. federal holiday.

Market sources cited American Petroleum Institute (API), which released figures on Wednesday, to say that U.S. crude stock levels rose by 622,000 barges in the week ending August 29.

API's estimate of a U.S. increase in crude stock went against the estimates of analysts surveyed by who, on average estimated that U.S. crude inventory had fallen by 2,000,000 barrels. (Reporting from Sam Li in Beijing, Trixie Yap and Nicole Jao in New York. Additional reporting by Nicole Jao and Christian Schmollinger.

(source: Reuters)