Oil price falls back from
one-year highs, hit by OPEC deal concerns
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[October 11, 2016]
By Amanda Cooper
LONDON
(Reuters) - Oil fell back from one-year highs on Tuesday, knocked by
concerns that a production cut by the world's largest exporters might
not be enough to erode a two-year old global surplus of unwanted crude
oil.
Oil prices jumped as much as 3 percent on Monday, after Russia and Saudi
Arabia both said a deal between the Organization of the Petroleum
Exporting Countries (OPEC) and non-OPEC members like Russia in curbing
crude output was possible.
December Brent crude oil futures <LCOc1> were down 42 cents at $52.72 a
barrel by 1100 GMT, below Monday's one-year high at $53.73, but off an
intraday low at $52.51, while U.S. futures <CLc1> were down 43 cents at
$50.92 a barrel.
Global oil supply could fall into line more quickly with demand if OPEC
and Russia agree to a steep enough cut in production, but it is unclear
how rapidly this might happen, the International Energy Agency said on
Tuesday. [IEA/M]
"The word I look at is 'if'," Saxo Bank senior manager Ole Hansen said.
"OPEC's compliance (track record) with its own limits is not good.
"What it all adds up to is an increased belief that a firm bottom has
been established, but as the market moves higher the risk of self-defeat
rises as it opens the door right open for the return of production
growth among high-cost producers," he said.
Igor Sechin, Russia's most influential oil executive and the head of the
Kremlin's industry champion Rosneft <ROSN.MM>, said his company will not
cut or freeze oil production as part of a possible agreement with OPEC.
"Underlying scepticism that global oil producers will succeed in taking
coordinated action to support prices is therefore alive and well," PVM
Oil Associates analyst Stephen Brennock said in a note.
"Meanwhile, of those that do see a chance of a genuine output deal, they
still need convincing that the proposed cuts will go far enough to
address the supply imbalance."
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A worker checks the valve of an oil pipe at an oil field owned by
Russian state-owned oil producer Bashneft near the village of
Nikolo-Berezovka, northwest of Ufa, Bashkortostan, Russia January
28, 2015. REUTERS/Sergei Karpukhin/File Photo
Goldman Sachs said in a note to clients on Tuesday that despite a production cut
becoming a "greater possibility", markets were unlikely to rebalance in 2017.
"Higher production from Libya, Nigeria and Iraq are reducing the odds of such a
deal rebalancing the oil market in 2017," the U.S. bank said, and added that
even if OPEC producers and Russia implemented strict cuts, higher prices would
allow U.S. shale drillers to raise output.
Adding to the drag on oil, the dollar <.DXY> rallied to its highest in 11 weeks,
lifted by rising expectations that the Federal Reserve could raise U.S. interest
rates by the end of the year. [FRX/]
(Additional reporting by Henning Gloystein in Singapore; Editing by Louise
Heavens, Greg Mahlich)
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