Doubts about OPEC cuts see oil prices tumbleNews // January 11, 2017
Oil prices fell by nearly 4 per cent on 9 January 2017, the most pronounced daily loss since OPEC’s meeting at the end of November. For a time overnight, Brent cost less than US$55 per barrel and WTI was priced below US$52 per barrel. Prices recovered somewhat on 10 January.
"Clearly there are growing doubts that OPEC will succeed in implementing most of the promised production cuts," said Commerzbank Research. "According to the Kuwaiti oil minister, 60-70 per cent of this has apparently already been achieved. The lion’s share of the cuts are probably attributable to the Arab Gulf neighbouring states of Saudi Arabia, Kuwait, Qatar and the United Arab Emirates. However, record-high oil exports from the south of Iraq in December and full allocations for Asian and European consumers in February are giving rise to doubts as to whether Iraq will curtail its production by 210,000 barrels per day as the terms of the agreement require."
Commerzbank said the reported decline in Russian oil production by 100,000 barrels per day in the first week of January had no supportive effect on prices and said that the decline was probably due first and foremost to the extreme weather conditions in the West Siberian oilfields, where temperatures plunged to as low as -60 degrees Celsius in some cases.
"The risk of a strike in the Nigerian oil industry had no impact on prices either, though this comes as no surprise in view of the nearly record-high speculative net long positions in Brent. Nonetheless, the ongoing debate about OPEC production cuts should preclude any further price slide," Commerzbank concluded.