TODAY.AZ / Business

Oil prices ebb as investors need more certainty

29 September 2016 [12:17] - TODAY.AZ

By Azernews


By Nigar Abbasova

Global oil prices climbed by 6 percent as cartel ministers reached consensus on production curbs, but later recorded fall amid strengthening skeptical forecasts over realization of the deal.

Crude prices had initially extended gains as most traders were impressed that OPEC had managed to reach a compromise to control the market, which became the first consensus to cut production since 2008.

Following more than four hours of talks in Algeria on September 28, OPEC committed itself to reducing output to between 32.5m barrels a day and 33m b/d, according to ministers.

The agreement surprised oil traders who thought a consensus would be difficult to reach because of divisions between Saudi Arabia and Iran, the cartel’s two largest and most influential members. Brent crude jumped $2.84 a barrel to $48.85.

But on Thursday morning Brent crude dropped 26 cents to trade at $48.43 per barrel, while WTI crude fell 6 cents to stand at $46.99 a barrel, Reuters reported.

All focus is now turned on OPEC's formal meeting scheduled for November 30 in Vienna, as how much each country will produce is to be decided at this meeting, while an invitation to join cuts could also be extended to non-OPEC countries such as Russia.

Saudi Energy Minister Khalid al-Falih stated that Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense" as part of any output limits, which could be set as early as the next Vienna meeting.

The decision became surprising and was assessed as a “strategy shift” for Riyadh, which earlier said it would reduce output to ease a global glut only if every other OPEC members and those outside the cartel followed suit. Iran, however, has argued it should be exempt from such limits as its production is now recovering from the sanctions.

More doubtful traders, focused on the lack of hard facts about the deal, stressing the necessity to see more details. Moreover, some analysts mention low chances that the limit will considerably change the supply outlook.  

The new production target is a decrease of between 240,000 b/d and 740,000 b/d from the 33.24m b/d the cartel pumped in August, according to analysts’ estimates.

Meanwhile, some support for the prices came from U.S. Energy Information Administration’s (EIA) official storage data, which revealed a drop of 1.9 million barrels in crude stocks to 502.7 million barrels in the week that ended on September 23, while analyst expected an increase of 3 million barrel.

 U.S. inventories, however, still remain at historically high levels for this time of year, according to the EIA.

URL: http://www.today.az/news/business/154647.html

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