OPEC Disappoints and Crude Weakens

EnergyNow 

Posted On May 25th
By : EnergyNow Media
 

May 25, 2017

Oil weakened after OPEC was said to agree to extend output cuts for another nine months, disappointing investors who had hoped for more.Futures erased gains for the week, dropping as much as 2.5 percent in New York to a new low for the day. OPEC has agreed to extend its supply deal for another nine months beyond June, said a delegate familiar with the matter, who asked not to be identified because the meeting hasn’t yet concluded.

The curbs are working, and prolonging the deal through March will “do the trick,” Saudi Oil Minister Khalid Al-Falih said before the ministerial meeting in Vienna Thursday. The Organization of Petroleum Exporting Countries will empower its monitoring committee to recommend “further interventions” if needed, Al-Falih said. Libya and Nigeria, which have boosted output since the curbs started in January, will continue to be exempt from production cuts, he said.

“These sources of incremental supply could reduce the effectiveness of a further extension,” Giovanni Staunovo, an analyst at UBS Group AG, said by phone. Investors will be disappointed by a nine-month extension after speculating OPEC might announce stronger measures, such as deeper cuts or a longer extension, he said.

West Texas Intermediate for July delivery fell 69 cents, or 1.3 percent, to $50.67 a barrel on the New York Mercantile Exchange at 12:09 p.m. in London. Total volume traded was about 183 percent above the 100-day average. Futures lost 11 cents, or 0.2 percent, to $51.36 on Wednesday.

Brent for July settlement slumped as much as 2.3 percent to $52.72 a barrel on the London-based ICE Futures Europe exchange, also a new low for the day. Prices fell 19 cents, or 0.4 percent, to $53.96 on Wednesday. The global benchmark crude traded at a premium of $2.68 to WTI.

Oil-market news:

OPEC ministers aren’t considering adding an option of an extra three months of supply reductions, said a delegate familiar with the matter, who asks not to be identified because the meeting is private. U.S. crude stockpiles dropped for a seventh week, by 4.43 million barrels, according to data from the Energy Information Administration Wednesday. They were forecast to fall by 2 million barrels in a Bloomberg survey. American crude output increased by 15,000 barrels a day to 9.32 million a day, the EIA said.

 

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