Sat, Dec 08, 2018 - Page 10 News List

Oil extends losses without output deal

CONCERNS PERSIST:OPEC failed to reach an agreement with its allies to reduce output, with Russia unwilling to cut production by about 300,000 barrels per day


Oil yesterday extended losses to near US$51 per barrel after OPEC ended talks without a deal on production curbs as its ally Russia refused to commit to the big output cut that Saudi Arabia demanded.

New York futures slipped as much as 1.3 percent, falling for a third session and paring their weekly gain to 0.1 percent.

Saudi Arabian Minister of Energy, Industry and Mineral Resources Khalid al-Falih had said in Vienna that he was not confident of an agreement yesterday, when OPEC was scheduled to again meet with its allies.

A proposal for a combined cut of 1 million barrels per day by the broader group was left dangling in uncertainty.

Oil has plunged more than 30 percent from a four-year high in October as concerns about oversupply were fueled by US waivers for Iranian oil buyers, as well as growing inventories and production in the US.

While al-Falih said that output cuts of 1 million barrels per day were adequate to balance the market, there has still been uncertainty over whether the amount would be enough to shift current bearish market sentiment and prop up prices.

“Unless OPEC and non-OPEC agree on a cut of at least about 1 million barrels a day, concerns of oversupply, particularly in the first quarter of 2019, will remain,” Japan Oil, Gas and Metals National Corp chief economist Takayuki Nogami said by telephone from Tokyo.

Al-Falih’s remarks “increased skepticism in oil markets about the prospect of a deal,” Nogami said.

West Texas Intermediate for delivery next month dropped as much as US$0.66 to US$50.83 per barrel on the New York Mercantile Exchange and was at US$51.05 at 7:36am in London. Prices decreased 2.7 percent to US$51.49 on Thursday.

Total volume traded was 42 percent more than the 100-day average.

Brent for February settlement lost US$0.49 to US$59.57 per barrel on London’s ICE Futures Europe exchange after falling 2.4 percent on Thursday. Futures were up 1.4 percent this week, ending eight weeks of declines.

The global benchmark crude traded at an US$8.30 premium to West Texas Intermediate for the same month.

OPEC’s failure to secure a deal suggests that the group is increasingly dependent on the support of non-member Russia.

Moscow was not ready for a “substantial cut,” al-Falih said.

Russian Minister of Energy Alexander Novak flew to Saint Petersburg, Russia, to meet Russian President Vladimir Putin to decide on their country’s contribution.

Although Russia had agreed to a cut in principle, the eventual size of its contribution remained undefined through this week’s talks in Vienna.

In private conversations earlier in the week, OPEC delegates said that Saudi Arabia had favored a Russian cut of about 300,000 barrels per day, but Moscow was seeking a smaller reduction of about 150,000.

Meanwhile, US crude inventories last week fell 7.32 million barrels after 10 straight weeks of gains, the US Energy Information Administration reported on Thursday.

That compared with expectations for a 2 million barrel decline in a Bloomberg survey of analysts.

The nation’s overseas crude shipments rose to a record 3.2 million barrels per day, turning the US into a net exporter for the first time in 75 years.

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