Oil Falls From 16-Month High As OPEC Production Continues Rising
Oil retreated from the highest close in 16 months as OPEC pumped a record amount of crude in November, partly led by members exempt from cutting output as part of last week’s deal to curb supply
Futures slid as much as 1.7% in New York after advancing 15% over the previous four sessions. The Organization of Petroleum Exporting Countries increased production to 34.16 MMbopd last month, according to a Bloomberg News survey, with Angola, Libya and Nigeria leading the gains. The last two aren’t required to reduce supply in last week’s agreement, meaning other members would have to make deeper cuts if the group is to reach its output goal.
Oil is trading around $51/bbl after OPEC agreed Wednesday to trim the group’s output by 1.2 MMbopd from January to stem a supply glut and buoy prices. Russia, which isn’t part of the bloc, has also pledged a reduction of as much as 300,000 bopd. Attention is now shifting to which other non-OPEC producers will reduce output when they meet in Vienna on Saturday. OPEC is hoping they will cut a further 300,000 bopd.
“The market is taking a breather; it has moved up strongly on sentiment after the OPEC cut announcement,” Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo, said by phone. The increase in production from Nigeria and Libya will be a “headache” and Schieldrop expects OPEC will cut back to 33 MMbopd rather than its stated target of 32.5 MMbopd.
West Texas Intermediate for January delivery lost as much as 87 cents to $50.92/bbl on the New York Mercantile Exchange, and was at $51.15 at 7:55 a.m. local time. The contract rose 0.2% to $51.79 on Monday, the highest close since July 2015. Total volume traded was about 35% above the 100-day average.
Vienna Meeting
Brent for February settlement lost as much as 62 cents, or 1.1%, to $54.32/bbl on the London-based ICE Futures Europe exchange. The contract on Monday gained 48 cents to $54.94, also the highest close since July 2015. The global benchmark crude traded at a $2.27 premium to February WTI.
Other invitees to the meeting on Saturday include Oman, Bahrain, Colombia, Egypt, Trinidad and Tobago, Turkmenistan, Azerbaijan and Brunei. Altogether, the 14 nations pumped about 18.8 MMbopd last year, equivalent to 20% of global supply, according to data from BP.
Source: World Oil
