Oil is struggling to recover from its OPEC disappointment
- Author: Zachary Reyes May 28, 2017,
May 28, 2017, 13:12
"Chinese demand in addition to US production (including Trump's export policy, ) is probably more critical to oil price formation so is likely keeping oil range-bound, even if the possible range is wide", said S&P Dow Jones Indices in a recent note.
While the agreement essentially spelled out a continuation of the previous production cuts for another nine months, the lack of an option to continue cuts into 2018 is one of the concerns brought up by analysts assessing the deal.
Oil stockpiles in advanced countries in the OECD jumped by 24 million barrels during the first quarter to a new record of 1.2 billion.
"Malaysia views such steps, in the long term, would positively impact more economies for both producers and consumers alike in achieving the sustainable development agenda".
The cuts helped push oil prices back above $50 per barrel but also spurred growth in the US shale industry, which does not participate in the output deal.
Brent crude fell $2.60 to $51.36 a barrel on Thursday and was trading at $51.47 on Friday morning while the West Texas Intermediate slipped $2.58 to $48.78 a barrel and had reached $48.82 on Friday.
Brent for July settlement was at $51.08 a barrel on the London-based ICE Futures Europe exchange, 38 cents lower.
"I have been in OPEC close to 20 years".
Oil prices tumbled 5 percent after OPEC made its announcement yesterday, signaling the market expected more than just an extension of the current rate of cuts: it expected OPEC, combined with its non-OPEC collaborators, to deepen these to more than 1.8 million bpd. Some non-OPEC oil producers, such as Russian Federation and Kazakhstan have also attempted to boost their production.
Iranian channel Press TV reported that the decision of the 13-nation cartel that includes Iran and Saudi Arabia, to extend the cuts for 9 months would effectively lower OPEC's production by 1.8 million barrels per day.
According to Goldman Sachs, the negative reaction was driven by the lack of greater cuts, an absence of caps on supplies from Libya and Nigeria that are still exempt from the deal, and no "clear exit strategy".
Energy Minister of Saudi Arabia, Khaled al-Falih, stated that the Saudi government is considering some scenarios to extend the oil production cut from six to nine to 12 months. But stubbornly high fossil fuel inventories - which have been maintained worldwide, but are most readily measured in the US due to open customs data - have prevented the measures from buttressing oil prices in a lasting way.