Oil drops after OPEC-led output cut misses expectations
- Author: Zachary Reyes Jun 02, 2017,
Jun 02, 2017, 18:33
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.
The last conference meet that happened in Vienna between the OPEC and other 11 non-members meet to decide if they need to continues the prolonged cut in production of oil of 1.8 million barrels that continued since December until first half period of 2017.
Mike Rothman, head of integrated oil research at Cornerstone Analytics, is also convinced prices will ultimately move higher despite supply coming from the U.S., Libya and Iraq.
"The cut in OPEC supplies will be offset by higher USA crude production", said KY Lin, spokesman for Formosa Petrochemical Corp.
We have to be careful now, because prices seem as unpredictable as policy.
Oil extended falls on Friday after tumbling in the previous session when OPEC and allied producers extended output cuts but disappointed investors betting on longer or larger supply curbs.
Exporters were keen to maintain global market share, and they cut domestic supplies or shipments to marginal buyers.
Global benchmark Brent fell 0.5 percent to $51.18, after slumping 4.6 percent overnight.
Not only did Opec underwhelm the market, many commentators believe curtailment of the cartel's output will be matched by further increases in USA shale production, with the headline output stateside tipped to rise to 10m bpd. United States of America shale production requires a higher price to be profitable.Ahead of the meeting, the organization announced that Equatorial Guinea had joined, expanding OPEC membership to 14.
"We're starting the beginning of the summer driving season, there's a lot of hopes that are tied to an inventory draw from Memorial day to Labor day", he said.
"OPEC agreeing to nine months without deeper cuts leaves prices at the mercy of inventories and US production and demand", said Greg McKenna, chief market strategist at futures brokerage AxiTrader. "I think we'll remain between $50 and $60 a barrel for the time being".
Other assessments pointed to the possibility of output cuts being extended into 2019 in order to bring down both crude oil and refined product stocks.
Rising U.S. shale output won't derail OPEC's goals and a nine-month extension will "do the trick", Al-Falih said Thursday after the meeting in Vienna.