Oil soft­ens af­ter OPEC de­ci­sion prompts rally

Kuwait Times - - BUSINESS -

Oil prices fell 1.5 per­cent to steady at around $53 a bar­rel yes­ter­day af­ter the big­gest weekly rally since 2009 fol­low­ing OPEC’s de­ci­sion this week to cut crude out­put in or­der to rein in a global glut. The mar­ket fo­cus now shifts to the im­ple­men­ta­tion and im­pact of OPEC’s first pro­duc­tion agree­ment since 2008, which will be joined by non-OPEC pro­duc­ers, af­ter data showed out­put in Rus­sia rose in Novem­ber to a post-Soviet high.

Front-month Brent crude fu­tures were down 81 cents by 1153 GMT from their last set­tle­ment at $53.12 per bar­rel. The con­tract was up around 12 per­cent this week, its big­gest gain since March 2009. US West Texas In­ter­me­di­ate (WTI) fu­tures were at $50.40, down 65 cents. The Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, which ac­counts for a third of global oil sup­ply, will re­duce pro­duc­tion start­ing in Jan­uary by 1.2 mil­lion bar­rels per day, or over 3 per­cent, to 32.5 mil­lion bpd. Rus­sia also agreed to cut out­put by 300,000 bpd. Rus­sia and other non-OPEC pro­ducer are set to meet with OPEC on Dec. 9. “The lack of firm out­put com­mit­ments from some non-OPEC pro­duc­ers may not be a ma­jor cause of con­cern, but the threat posed by non-com­pli­ance and the po­ten­tial for US shale op­er­a­tors to spoil the party should not be ig­nored,” bro­ker­age PVM Oil As­so­ciates said.

“Pock­ets of un­ease are al­ready ap­par­ent and fol­low­ing the knee-jerk re­ac­tion that has pro­duced un­sus­tain­able dou­ble-digit per­cent­age price gains, signs are that the OPECin­duced eu­pho­ria is fad­ing this morn­ing with both crude bench­marks open­ing on a softer note,” PVM added.

Rus­sia said yes­ter­day that its out­put in Novem­ber rose slightly to 11.21 mil­lion bar­rels per day, a post-Soviet high. As part of the OPEC deal, Rus­sia has promised to grad­u­ally cut its crude out­put by up to 300,000 bar­rels per day in the first half of 2017. With cuts only be­ing im­ple­mented next year against end-2016 lev­els, an­a­lysts said there was still a pos­si­bil­ity that over­sup­ply, which has halved oil prices since 2014, re­mains in place next year. —Reuters

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