Nigeria to Maintain Crude Output As Opec Extends Crude Cut
- Author: Zachary Reyes Jun 09, 2017,
Jun 09, 2017, 10:41
Regarding the effect of the proposed partial sale of US Strategic Petroleum Reserve (SPR) on OPEC deal, the analysts noted that the impact on oil prices from a gradual sell-off of the SPR is likely to be small as commercial stocks are falling.
The extension, which also includes Russian Federation and other non-OPEC countries, was widely expected and had already been factored into oil prices.
The problem for OPEC is that while crude sits substantially below the highs of around $100 a barrel reached in 2014, it is high enough to bring back into the market USA producers who eased back as prices tumbled a year ago.
This led the oil producing countries to propose production cuts starting December to firm oil prices back up to the current United States dollars 50-55 per barrel-mark. Three years ago, USA shale producers needed to see prices of $70 to $80 per barrel to be competitive, he said. "And to this end we have a technical committee working on this every month", he told CNBC in Vienna when asked about the possibility of deeper cuts to production.
U.S. crude prices were flat at $48.88 on Friday, after losing 4.8% overnight, set to end the week 2.8% lower.
The agreement at a meeting in Vienna on Thursday to keep in place a reduction of 1.8 million barrels per day was not enough for traders and immediately sent crude prices plunging nearly five percent, which in turn dragged energy firms lower.
In physical markets, however, where tankers can take weeks or months to deliver up to $100 million in crude oil, refiners want to know if they will be forced to search for new suppliers.
At 8:14am BST, Brent was broadly flat at $51.49 per barrel up 0.1% or 3 cents, while the WTI was down 0.1% or 6 cents to $48.84 per barrel.
Producers have expressed confidence that this plan will bring down crude oil stocks to their five-year average of 2.7 billion barrels - but the market had hoped for a last-minute agreement on more far-reaching action. The attacks have hit oil production and damaged pipelines in Nigeria.
So far, though, the cuts that started in January have barely dented supply in Asia, home to three of the world's four biggest oil consumers. OPEC could decide to return production to pre-cut levels as the cartel may not want to lose its market share and look to raise revenues through volumetric growth.
Oil prices plunged almost 5 percent on Thursday after major exporters extended their deal to limit oil production for nine months, disappointing investors who were anticipating deeper cuts.