Oil prices steady Nige­ria plans to raise out­put sharply

Kuwait Times - - BUSINESS -

LON­DON: Oil prices stead­ied yes­ter­day as in­vestors waited to see if OPEC and Rus­sia would de­liver promised pro­duc­tion cuts de­signed to end a sup­ply over­hang that has weighed on the mar­ket for more than two years. North Sea Brent crude oil was up 10 cents a bar­rel at $54.03 by 1130 GMT. US light crude was up 15 cents at $51.08 a bar­rel. Oil prices surged al­most 20 per­cent af­ter the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries and Rus­sia an­nounced last week that they would cut pro­duc­tion next year in an ef­fort to prop up mar­kets.

But doubts have emerged over whether the planned cuts will be big enough to re­bal­ance the mar­ket. Since the deal was an­nounced, both OPEC and Rus­sia have re­ported record pro­duc­tion and out­put else­where is also re­silient. The US En­ergy In­for­ma­tion Ad­min­is­tra­tion said on Tues­day it ex­pected do­mes­tic crude oil pro­duc­tion for 2016 and 2017 to fall by less than pre­vi­ously ex­pected. “In­vestors are torn be­tween hopes that pro­duc­ers will cut enough pro­duc­tion to bal­ance sup­ply and de­mand, and fears that they won’t,” said Ta­mas Varga, se­nior an­a­lyst at Lon­don bro­ker­age PVM Oil As­so­ci­ates.

OPEC and non-OPEC oil pro­duc­ers meet this week­end in Vi­enna to agree de­tails of the out­put cut, which tar­gets an over­all re­duc­tion of around 1.5 mil­lion bar­rels per day (bpd). OPEC mem­ber Nige­ria, ex­empt from the cuts, said yes­ter­day it hoped to boost its oil pro­duc­tion to 2.1 mil­lion bpd in Jan­uary, up from 1.9 mil­lion bpd now.

“We will see whether be­lief in the (OPEC pro­duc­tion) deal will hold,” said Eu­gen Wein­berg, head of com­modi­ties re­search at Com­merzbank in Frank­furt. “There is a big dis­crep­ancy right now be­tween ex­pec­ta­tions, per­cep­tion and re­al­ity.”

De­spite wide­spread skep­ti­cism, many an­a­lysts say 2017 will likely see a more bal­anced oil mar­ket. “Oil mar­kets are on track to tighten over 2017, which will be ac­cel­er­ated by OPEC’s de­ci­sion to re­duce pro­duc­tion along­side non-OPEC coun­tries,” said BMI Re­search. “If ef­fec­tively im­ple­mented, we ex­pect the global oil mar­ket will re­turn to bal­ance in Q1 2017.” Oil pro­duc­tion has been out­pac­ing con­sump­tion by 1 to 2 mil­lion bar­rels per day since late 2014. “The av­er­age an­nual oil price will be higher in 2017 than in 2016, with Brent at $55 per bar­rel for the year,” BMI Re­search said. The av­er­age 2016 Brent price has so far been $44.47 per bar­rel.

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