OPEC production freeze fails to boost crude oil prices

Judith Bessette
Abril 12, 2017

Oil prices fell on Monday, pulled down by rising the US drilling activity and by doubts whether an OPEC-led production cut initially due to end in mid-2017 would be extended.

Prices for front-month Brent crude futures LCOc1 the global market benchmark gained 55 cents to $51.30 per barrel by 1315 GMT (9:15 a.m. ET).

West Texas Intermediate for May delivery dropped as much as 63 cents to $47.34 a barrel on the New York Mercantile Exchange and was at $47.66 as of 12:55 p.m. London time.

Oil prices edged up on Friday, supported by a fall in Saudi exports to the United States, but overall markets remained under pressure on the back of a world market awash with fuel.

This makes U.S. crude oil appealing for importers, further negating the impact of OPEC output cuts.

A compliance committee of OPEC ministers from Kuwait, Algeria and Venezuela and their counterparts from Russian Federation and Oman concluded meetings in Kuwait City on Sunday with a statement asking OPEC to review the market and give them a recommendation in April on rolling over the cuts.

Unless OPEC extends the curbs beyond June or makes bigger cuts, traders say oil prices are at risk of falling further.

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Oil inventories are high because of low us demand and higher supply, and the market should re-balance in the second half of the year, OPEC Secretary-General Mohammad Barkindo told reporters in Kuwait.

The committee said it "encouraged all participating countries to press on toward 100 percent conformity".

At the December meeing, 11 non-OPEC oil producers cooperated with the 13 OPEC member countries in a concerted effort to accelerate the rebalancing of the global oil market through an adjustment in combined production of 1.8 million barrels per day.

Traders said that rising USA drilling activity and oil production were contributing to financial traders reducing their long positions in crude futures to the lowest level since early December. "Crude prices tested the support at $50 per barrel for Brent and rebounded from there", said Sukrit Vijayakar, director of energy consultancy Trifecta.

The comments from Iranian Oil Minister, Bijan Zanganeh, were followed by a statement from non-OPEC member Azerbaijan that it was ready to join an extension of the deal into the second half of this year.

Armed factions at the western Libyan oil fields of Sharara and Wafa blocked production, reducing output by 252,000 barrels per day (bpd), about a third of production, a source at the National Oil Corporation (NOC) said on Tuesday.

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