Oil falls near $60 despite Opec plan to cut output
VIENNA: Oil in London fell to near $60 a barrel as the market appeared to disagree with Saudi Arabia’s energy minister, who said output cuts of a million barrels per day (bpd) from Opec (Organisation of the Petroleum Exporting Countries) and its allies were adequate for the market.
Brent futures in London earlier fell as much as 5.2%. There is currently no agreement among producers to cut output, Saudi minister Khalid Al-Falih told reporters in Vienna, where the Opec is meeting. The sell-off gathered pace amid a decline in stock markets and continued trade tensions between the U.S. and China.
Earlier in the week oil was starting to recover from some of last month’s losses after Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman said they agreed to extend their deal to manage the oil market into 2019.
Traders are waiting to see whether Opec and its allies including Russia can put together a final pact at meetings this week, after US President Donald Trump renewed his call for the group not to curb supplies and to keep prices low.
“The market is clearly uncertain that there will be an adequate Opec production cut agreement at the end of the day,” said Hans Van Cleef, senior energy economist at ABN Amro Bank NV.
Market pessimism is growing as “different energy ministers are giving mixed messages on the expected or preferred outcome,” he said.
Brent for February settlement was down $2.48 to $59.08 on the ICE Futures Europe exchange at 11:11am in London, after falling as much as $3.20 earlier. It declined 0.8% on Wednesday. The global benchmark crude traded at an $8.05 premium to West Texas Intermediate for the same month.
West Texas Intermediate for January delivery traded down $2.04 at $50.85 a barrel on the New York Mercantile Exchange, after dropping 5% earlier.
The contract fell 36% to $52.89 on Wednesday. Total volume traded was about 145% higher than the 100-day average.
Saudi Arabia’s Al-Falih said any production cut from the producer alliance known as OPEC+ shouldn’t be “overly large,” with a reduction of about 1 million barrels a day being adequate.
His comments follow a day of talks on Wednesday that concluded with a panel led by Saudi Arabia and Russia recommending an output reduction lasting six months, Oman’s Oil Minister Mohammed Al Rumhy told reporters.