UPDATE 5-Oil prices touch multi-week lows, as supply worries grow

By Dmitry Zhdannikov
LONDON, Oct 27 (Reuters) - Oil prices fell to their lowest
in six weeks on Tuesday, as mounting worries over persistent
oversupply grew ahead of U.S. data that was expected to show
another increase in crude inventories.
Brent December futures LCOc1 fell 82 cents to $47.72 a
barrel by 1338 GMT, their lowest since mid-September, after
settling the previous session down 45 cents.
U.S. crude CLc1 dropped $1.10 to $42.88 a barrel, having
touched a nine-week low of $42.74 earlier in the day.
The difference between the price of oil for immediate
delivery and in a year's time yawned to its widest in more than
six months, reflecting investors' perception that supply is
likely to be far more widely available now than in the future.
"It continues to show excess (supply) in the market in this
quarter and going forward ... it's only really in the last
quarter of next year when we could potentially see some
rebalancing of the market," Natixis commodity strategist
Abhishek Deshpande said.
"What markets don't tend to realise is the overhang of
crude, which has been developing since September last year, will
go into the end of next year," he said.
U.S. production cuts - from a peak of around 9.6 million
barrels a day to around 9.1 million - and optimism over demand
have failed to translate into higher prices, said Ric Spooner,
chief market analyst at Sydney's CMC Markets.
U.S. commercial crude stockpiles are expected to have risen
for a fifth straight week, by an average of 3 million barrels to
479.6 million, in the week ended Oct. 23, a Reuters survey
showed.
While stocks of distillates, which include diesel and jet
fuel, are expected to fall by 2 million barrels, storage
utilisation for distillates in the United States and Europe is
nearing historic highs, Goldman Sachs (N:GS) said on Monday.
Also weighing on prices was news that U.S. congressional
leaders had proposed to sell 58 million barrels of oil from U.S.
emergency reserves to help pay for a budget deal, although the
sales would happen only between fiscal years 2018 and 2025.
Longer-term, non-OPEC supply could fall next year for the
first time since 2008 as deep cuts in capital expenditure by
publicly traded companies lead to a 700,000 barrels-per-day fall
in production to 52.7 million bpd, Jefferies added.
Analysts from the Energy Aspects think-tank added that some
5 million bpd of projects, which were meant to be completed from
2017-19, had been delayed or cancelled: "All of this will start
to show up in steep declines in 2017 supplies."
Investors await the outcomes of key policy talks this week,
including a U.S. Federal Reserve meeting that starts later on
Tuesday and China's fifth plenum, a meeting of the Communist
Party's central committee, that began on Monday.
Oil prices could get support from short-covering if
investors think the Fed will take a dovish view towards interest
rates at its meeting, Spooner said.
"The Fed and a weaker dollar could save the day, as could
improved supply statistics. That could still mean that this
downswing might turn out to be a correction of the latest rally,
not the beginning of a major move lower," Spooner said in a blog
post.