Oil Drops as Producers Say They Need More Time to Cut Stockpiles

JMMC convened in Kuwait City for its second meeting last Sunday where it announced that based on the report of the Joint OPEC and non-OPEC Technical Committee (JTC) for the month of February 2017, OPEC and participating non-OPEC countries have continued their progress towards full conformity with their voluntary adjustments in production.

Nezar al-Adsani, the CEO of the Kuwait Petroleum Corp., said the decline in crude oil prices was creating risks for investments, which the official Kuwaiti news agency, KUNA, said "could create unstable conditions in worldwide markets". Most of its members are facing budgetary deficits, while countries like Venezuela, which depend on oil exports for most of their budget, have entered a period of depression and stagnation.

While many in OPEC have called for prolonging the curbs, Russian Federation has been less definitive. The final version merely said that there would be a review of oil market conditions and another meeting on the subject on April 17.

The Organization of the Petroleum Exporting Countries agreed in late November to cut its production by 1.2 million barrels a day, the first reduction agreed to by the cartel since 2008.

Nevertheless, Saxo Bank Head of Commodity Strategy Ole Hansen said supply remained in focus ahead of the US Energy Information Administration oil stocks report.

All OPEC ministers are meeting again on May 24, when the extension is likely to be discussed.

Brent for May settlement gained as much as 46 cents, or 0.9 percent, to $51.10 a barrel on the London-based ICE Futures Europe exchange.

Worldwide benchmark Brent crude was down 70 cents at $50.10 by 1333 GMT (9:33 a.m. ET), after falling as low as $50.06.

About 225,000 WTI contracts had changed hands, lower than average.Brent crude was down 4 cents at $50.54, also down about 2 percent this week.Oil has been on the back foot for more than two weeks now, after a string of US inventory reports suggested that output cuts by the Organization of the Petroleum Exporting Countries were not having the desired effect in reducing global oversupply. The nation has cut its output by 185,000 barrels a day compared with a target of 300,000, Novak said Saturday.

Production in March has been reduced by more than its share of 210,000 bpd required under the OPEC accord, the sources said, adding that output from the country's biggest oilfield Rumaila is now down by around 70,000 bpd to 1.380 million bpd due to maintenance.

Boutarfa stated that the compliance of OPEC member states to the agreement is "at levels we have never seen" because it has reached 100% while acknowledging that the stand of non-OPEC members is "the scenario we expected" although their compliance rate of around 40% "will be gradual rather than instant".

  • Zachary Reyes