Oil dips as OPEC, Russian output rises ahead of production cut
Oil prices slipped on Tuesday as crude output rose in virtually every major export region despite plans by OPEC and Russia to cut production, triggering fears that a fuel glut that has dogged markets for over two years might last well into 2017.
International Brent crude oil futures <LCOc1> were trading at $54.64 (42.85 pound) per barrel at 0935 GMT, down 30 cents from Monday’s close. U.S. West Texas Intermediate crude was at $51.39 a barrel, down 40 cents.
Traders and analysts said the boost from last week’s decision by OPEC to cut crude production had faded and the cartel’s promise had been undermined by data showing rising production from within its member countries and Russia.
“Most of the position adjustments that the OPEC decision forced upon traders have now run their course and it leaves the market exposed to profit taking,” said Ole Hansen, head of commodities strategy at Saxo Bank, citing surveys pointing to record production from OPEC during November.
“What’s troubling is that the rise is coming from African producers, two of which are exempt from cutting production,” he said. “The meeting on Saturday between OPEC and non-OPEC producers will be crucial in order to maintain the bullish sentiment seen since last Wednesday.”
OPEC’s oil output set another record high in November, rising to 34.19 million barrels per day (bpd) from 33.82 million bpd in October, according to a Reuters survey based on shipping data and information from industry sources.
And Russia reported November average daily oil production at 11.21 million bpd, its highest in nearly 30 years. That means OPEC and Russia alone produced enough to cover almost half of global oil demand, which is just above 95 million bpd.
The news came just days after OPEC and Russia agreed an historic deal to cut output in 2017, triggering a more than 10 percent rise in prices, in a bid to end a fuel supply overhang.
As part of the deal, OPEC said major oil producers not part of the group had agreed to cut a further 600,000 bpd of production. These countries and OPEC are due to meet this weekend to finalise their portion.
In a further sign that the fight for market share is not over – especially in Asia, the world’s biggest consumer region – Saudi Aramco cut the January price for its Arab Light grade for Asian customers by $1.20 a barrel versus December.
But analysts said oil prices were unlikely to tumble back to levels of around or below $45 a barrel seen before last week’s deal. Matt Stanley, fuel broker at Freight Investor Services International in Dubai, said the oil market was trying to find “some kind of level it is happy settling at.”
“I have a feeling it is more towards the $50 per barrel range than $55 per barrel,” he said.
Source: Reuters (By Sabina Zawadzki; Additional reporting by Henning Gloystein in Singapore, editing by David Evans)