Finance

Oil stems sharp declines as Opec decision disappoints market

Oil stems sharp declines as Opec decision disappoints market”

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.

"Texas shale producers forced OPEC this morning to extend its oil production cuts for nine months", said Ryan Sitton, of the Texas Railroad Commission.

David Arrington, president of shale oil producer Arrington Oil & Gas in Midland, Texas, said that how USA producers respond in coming months will have as much of an effect on pricing as OPEC's cuts.

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.

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.

Global benchmark Brent fell by 0.5% to $51.18 a barrel, while the U.S. crude prices decreased by 0.6% to reach $48.57 a barrel, reported Reuters.

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Investors are also nervous about increasing crude output from Nigeria and Libya, which are exempt from cutting production as they attempt to restore supplies sidelined by internal conflicts.

"Following the meeting, we have seen both Brent and WTI trading lower on the news as a proportion of the market had priced in the potential for deeper cuts".

Traders yesterday were disappointed that an OPEC-led decision to extend current production curbs did not go deeper. The decision was disappointing as investors were expecting longer or larger cuts, possibly for 12 months.

United States crude prices were flat at $48.88 on Friday, after losing 4.8% overnight, set to end the week 2.8% lower. USO, the most heavily traded oil exchange-traded product in the USA, is now nearly 20 percent below its 52-week high, putting it dangerously close to officially being in a bear market.

According to OPEC President and Saudi Energy Minister Khalid al-Falih the output cuts will be extended further when the signatories to the deal meet next in November.



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