OPEC output cuts falls short of expectations: Angel Commodities Broking

Beyond bloated inventories, one of the main reasons markets have not tightened more has been USA oil production, which has soared more than 10 percent since mid-2016 to 9.3 million bpd.

We had mentioned in our forecast yesterday that the next direction in the USDCAD pair would be dependent on the oil prices and the OPEC meeting that was held yesterday and as expected, the pair shot up during the course of the day yesterday as the OPEC meeting concluded on a disappointing note, as far as the markets were concerned.

So, while OPEC's seemingly unflappable ability to cobble together an agreement has managed to keep a floor under prices this year, the group's tactics haven't fixed the underlying problem.

Following Thursday's deal, USA benchmark West Texas intermediate crude futures fell 5% to $48.90 a barrel, around the same price as the end of November, just before the initial OPEC decision to curb output.

Oil had climbed back above US$51 a barrel after Saudi Arabia and non-Opec member Russian Federation rallied support from the Organisation of Petroleum Exporting Countries (Opec) and other nations to extend the deal into next year.

With the extension Opec and its allies proposed already priced in, the inventory contraction is one of the main bullish factors, he said.

The history of the relationship between OPEC and the US shale oil industry has evolved a great deal since the cartel discovered it had a surprise rival emerging in a core market for its oil around five years ago.

"The December meeting was a breakthrough", he said.

Brent futures settled up 69 cents to US$52.15 a barrel, or 1.3 per cent, after hitting a session low of US$50.71.

The minister said convenient oil price for OPEC is between $55-60 per barrel. "So is that price level not high enough to encourage too much shale?"

Some OPEC members seem keen to show they have shed any prior naivete about shale, making it a key topic during Thursday's meeting after barely mentioning it before.

At the same time, Novak stressed that the committee, if necessary, may meet more often than once every two months.

"For further development in oil markets, it is a wait and watch approach".

By the same token, some US shale leaders may also want a better insight into OPEC thinking and help OPEC understand that shale is not a flash in the pan. India, the world's third-largest oil consumer, said this week it is looking to the United States for greater supply.

The Dow Jones Industrial Average .DJI fell 2.1 points, or 0.01 percent, to 21,080.85, the S&P 500 .SPX gained 0.18 points, or 0.01 percent, to 2,415.25 and the Nasdaq Composite .IXIC added 1.95 points, or 0.03 percent, to 6,207.20.

Ahead of the meeting, the organisation announced that Equatorial Guinea had joined, expanding OPEC membership to 14.

OPEC meets again in November to reconsider output policy.

"Cooperation between OPEC countries and non-OPEC countries will continue, and we will cooperate not only as part of those goals for balancing the market, but also in a bilateral and multilateral formats", he said.

  • Zachary Reyes