In producer’s meeting in Algeria, OPEC members announced an output cut for all of its members to 32.5 MMbpd-33 MMbpd (million barrels per day).
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On Thursday, Reuters reported (http://uk.reuters.com/article/uk-oil-opec-gulf-idUKKCN12R1PO) that energy ministers from Persian Gulf members of OPEC, including Saudi Arabia, told Russian Federation that they are willing to cut 4% from their peak oil output.
Energy Minister of Kazakhstan Kanat Bozumbayev said that the volume of production may reach the level ranging from 4 to 7 million tons, mentioning that all will depend on the operation of drills and equipment.
Brent crude futures were down 51 cents at one stage at $50.28 a barrel before recovering slightly to $50.40. However, rising uncertainty over the execution of the plan has dragged oil prices over 2% lower this week so far.
Prices fell from about $100 a barrel a couple of years ago to less than $30, which caused serious problems for oil companies and nations dependent on oil exports for revenue.
January 2017 contracts opened at $50.20, with a mid-day high of $30.42 and a low of $49.43.
BMI Research said “the most likely outcome from the November 30 OPEC meeting will be a watered down agreement to intervene in the oil market” and that “OPEC will struggle to find a consensus on reaching the 32.50-33 million barrel per day production target agreed in September”. He expects Saudi Arabia to cut output by about 400,000 barrels a day and the U.A.E.to trim a further 100,000 barrels a day. Iraq, the second-largest producer in the cartel, is reportedly asking for exemptions from any production limits due to disruptions caused by the insurgency linked to the Islamic State terrorist group.
“Iraq and Iran are disputing OPEC’s production numbers”, Phil Flynn, analyst at Price Futures Group in Chicago, said of the cartel’s baseline for setting output quotas.
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But sources close to the matter say it is generally understood that Nigeria, Libya and Iran should be exempt from the agreement, as output from these countries has been dented by wars and sanctions. “Whilst such reduction is largely in the hand of OPEC, the re-balancing is already taking place in the U.S.”, Tamas Varga of oil broker PVM said. While West Coast inventories declined, pushing down the nationwide total, that region’s distribution system is isolated from the rest of the country and changes in stockpiles in that area are often dismissed by the market. It all adds up to a “new normal” for oil. (XOM) is floating the idea of constructing a trading division. Downward revisions to global growth forecasts, especially for emerging markets, offset supporting factors, such as the growth in oil demand buoyed by lower prices in the past year.
