Business Headlines

Oil Retreats as Investors Look for Signs of OPEC Deal Compliance

published Aug 7th 2017, 12:18 pm, by Jessica Summers and Nico Grant

(Bloomberg) —Oil fell as investors sought reassurance that the world’s largest oil producing countries are complying with their supply-cut deal.

Futures slid as much as 2.1 percent in New York. Russia and Kuwait were said to meet producers such as Iraq in Abu Dhabi to discuss compliance to the OPEC production-cut deal. Libya’s production recovery was back on track as operations at its biggest oil field, Sharara, returned to normal after being halted Sunday by armed protesters. Rebounding Libyan supply has hindered efforts by fellow OPEC members to plug a global glut. Worldwide drilling reached its highest in almost two years in July, according to Baker Hughes Inc.

“The OPEC concerns are certainly going to keep crude from breaking out,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “Before we see a significant takeoff, we are going to have to see commitment from OPEC that they are in it for as long as is required. They are going to have to come out and make those statements.”

Oil in New York was unable to hold its advance above $50 a barrel last week as signs of rising global supply eroded optimism that output curbs by the Organization of Petroleum Exporting Countries and its partners are rebalancing the market. Compliance with promised production cuts was 86 percent in July, according to a Bloomberg survey.

West Texas Intermediate for September delivery fell 37 cents to $49.21 a barrel at 1:03 p.m. on the New York Mercantile Exchange.

Brent for October settlement dropped 27 cents to $52.15 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.77 to October WTI.

Saudi Arabia said last month that it planned to increase pressure on nations failing to comply with their pledged cuts. Russia and Kuwait experts started two days of separate meetings with representatives of Iraq, U.A.E., Kazakhstan, Malaysia in Abu Dhabi to discuss countries compliance with global crude production cuts, according to people familiar with situation, who asked not to be identified.

“I don’t think anything will come out of that,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Maybe that is making people a little bearish — because they think something needs to be done about Libya and Nigeria.”

OPEC’s plan to cut production has misfired and the group would have been better with a deeper cut for a shorter period of time, Francisco Blanch, Bank of America Merrill Lynch global head of commodities research, said in a Bloomberg Television interview.

Libya resuming operations at Sharara is emblematic of the problems for OPEC and the oil market in terms of just the gross oversupply situation that we remain in,  John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. The meetings among producers will be a negative for the market too if they can’t agree on recommending some further measures.

Oil-market news:

Spain’s Repsol SA, Norway’s Statoil ASA and Italy’s Eni SpA are said to have evacuated some or all expatriate workers from Venezuela as the political crisis continues. U.S. drillers reduced the number of crude-oil rigs by one to 765 last week, according to data Friday from Baker Hughes. That’s the second decline in three weeks. Goldman Sachs Group Inc. said global oil-demand growth could be even higher than its projection of 1.63 million barrels a day this year, after surprising strength in China and elsewhere during the second quarter.

The Author

Walt Alexander

Walt Alexander

Walt Alexander is the editor-in-chief of Men of Value. Learn more about his vision for the online magazine for American men with the American values—faith, family & freedom—in his Welcome from the Editor.

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