Oil price falls back from one-year highs

Kuwait Times - - BUSINESS -

Oil fell back from one-year highs yes­ter­day, knocked by con­cerns that a pro­duc­tion cut by the world’s largest ex­porters might not be enough to erode a two-year old global sur­plus of un­wanted crude oil. Oil prices jumped as much as 3 per­cent on Mon­day, af­ter Rus­sia and Saudi Ara­bia both said a deal be­tween the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) and nonOPEC mem­bers like Rus­sia in curb­ing crude out­put was pos­si­ble.

De­cem­ber Brent crude oil fu­tures were down 42 cents at $52.72 a bar­rel by 1100 GMT, be­low Mon­day’s oneyear high at $53.73, but off an in­tra­day low at $52.51, while US fu­tures were down 43 cents at $50.92 a bar­rel. Global oil sup­ply could fall into line more quickly with demand if OPEC and Rus­sia agree to a steep enough cut in pro­duc­tion, but it is un­clear how rapidly this might hap­pen, the In­ter­na­tional En­ergy Agency said yes­ter­day.

“The word I look at is ‘if’,” Saxo Bank se­nior man­ager Ole Hansen said. “OPEC’s com­pli­ance (track record) with its own lim­its is not good. “What it all adds up to is an in­creased be­lief that a firm bot­tom has been es­tab­lished, but as the mar­ket moves higher the risk of self-de­feat rises as it opens the door right open for the re­turn of pro­duc­tion growth among high-cost pro­duc­ers,” he said.

Igor Sechin, Rus­sia’s most in­flu­en­tial oil ex­ec­u­tive and the head of the Krem­lin’s in­dus­try cham­pion Ros­neft, said his com­pany will not cut or freeze oil pro­duc­tion as part of a pos­si­ble agree­ment with OPEC. “Un­der­ly­ing skep­ti­cism that global oil pro­duc­ers will suc­ceed in tak­ing co­or­di­nated ac­tion to sup­port prices is there­fore alive and well,” PVM Oil As­so­ci­ates an­a­lyst Stephen Bren­nock said in a note.

“Mean­while, of those that do see a chance of a gen­uine out­put deal, they still need con­vinc­ing that the pro­posed cuts will go far enough to ad­dress the sup­ply im­bal­ance.”

Gold­man Sachs said in a note to clients yes­ter­day that de­spite a pro­duc­tion cut be­com­ing a “greater pos­si­bil­ity”, mar­kets were un­likely to re­bal­ance in 2017. “Higher pro­duc­tion from Libya, Nige­ria and Iraq are re­duc­ing the odds of such a deal re­bal­anc­ing the oil mar­ket in 2017,” the US bank said, and added that even if OPEC pro­duc­ers and Rus­sia im­ple­mented strict cuts, higher prices would al­low US shale drillers to raise out­put.

Adding to the drag on oil, the dol­lar ral­lied to its high­est in 11 weeks, lifted by ris­ing ex­pec­ta­tions that the Fed­eral Re­serve could raise US in­ter­est rates by the end of the year. — Reuters

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