Oil prices gy­rate as OPEC bosses head to Vi­enna

Kuwait Times - - BUSINESS -

Oil prices gained more than one per­cent yes­ter­day in volatile trad­ing af­ter falling as much as 2 per­cent, re­coup­ing the losses as the mar­ket re­acted to the shaky prospect of ma­jor pro­duc­ers be­ing able to agree out­put cuts at a meet­ing to­mor­row.

Brent crude fu­tures were 38 cents higher at $47.62 per bar­rel by 1238, af­ter falling in early morn­ing trade, claw­ing back losses and falling again. US West Texas In­ter­me­di­ate (WTI) crude fu­tures also fluc­tu­ated widely be­fore trad­ing at $46.36, 30 cents higher.

Trad­ing turned choppy af­ter prices tum­bled more than 3 per­cent on Fri­day as doubts grew over whether the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) would reach agree­ment to help curb a global sup­ply over­hang that has more than halved prices since 2014.

Mar­ket watch­ers ex­pected prices to re­main re­ac­tionary un­til OPEC’s to­mor­row meet­ing of­fers the mar­ket a de­fin­i­tive an­swer as to whether the car­tel would make cuts. “There’s go­ing to be spec­u­la­tion un­til the meet­ing that makes prices very dif­fi­cult to pre­dict be­tween now and Wed­nes­day,” said Hamza Khan, head of com­modi­ties strat­egy at ING. “What­ever small fun­da­men­tal news we get will be drowned out by the shout­ing from Vi­enna.”

On Sun­day, Saudi Ara­bian En­ergy Min­is­ter Khalid Al-Falih said the oil mar­ket would bal­ance it­self in 2017 even if pro­duc­ers did not in­ter­vene, and that keep­ing out­put at cur­rent lev­els could there­fore be jus­ti­fied. The state­ment stoked sim­mer­ing dis­agree­ment be­tween OPEC and non-OPEC crude ex­porters such as Rus­sia over who should cut pro­duc­tion by how much.

By Mon­day, OPEC was scram­bling to res­cue the deal, with an­a­lysts warn­ing of a sharp price cor­rec­tion if they fail, and prices spiked as Iraq’s oil min­is­ter said the coun­try would co­op­er­ate with the group to reach an agree­ment “ac­cept­able to all.”

A meet­ing sched­uled for yes­ter­day be­tween OPEC and non-OPEC pro­duc­ers was called off af­ter Saudi Ara­bia de­clined to at­tend, while con­cerns over the fea­si­bil­ity of a deal pushed the crude oil volatil­ity in­dex close to a nine-month high. Others warned that even if some form of an out­put re­stric­tion is an­nounced af­ter pro­duc­ers meet in Vi­enna on Wed­nes­day, the de­tails mat­ter greatly.

“Do not take an an­nounce­ment of a head­line cut of 1 mil­lion bar­rels per day (bpd) at face value. It could still im­ply an OPEC pro­duc­tion level con­sid­er­ably in ex­cess of 33 mil­lion bpd, de­pend­ing on de­vel­op­ments in Libya and Nige­ria and the speed and rigor of com­pli­ance,” David Hufton, man­ag­ing di­rec­tor of bro­ker­age PVM Oil As­so­ci­ates Ltd. said in a note.

Even if a cut is agreed, over­sup­ply may not end soon. The US oil rig count rose by three last week, and Gold­man Sachs said that “since its trough on May 27, 2016, pro­duc­ers have added 158 oil rigs (+50 per­cent) in the US.” — Reuters

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