Oil Retreats From One-Month High as OPEC Seen Having to Cut More

  • OPEC is about 60% of the way to reaching production target
  • Donald Trump says Iran has been “put on notice” for test

Oil fell from a one-month high amid signs that OPEC will have to make further cuts to fully comply with last year’s historic production deal.

The Organization of Petroleum Exporting Countries cut output by 840,000 barrels a day last month, according to a Bloomberg survey. Nigeria, Libya and Iran, which are exempt from the curbs, boosted production by a combined 270,000 barrels. Prices climbed earlier after President Donald Trump said that Iran has been “put on notice” for testing ballistic missiles. U.S. crude supplies rose to the highest level since August last week, government data show.

Oil has fluctuated above $50 a barrel since 11 nations including Russia last month joined with OPEC to trim supply. While Middle Eastern producers from Saudi Arabia to Iraq have implemented cuts and Russia says it’s ahead of schedule with its own reduction, wary investors are also considering signs that U.S. drillers are taking advantage of higher prices to stage a comeback.

"We’re trying to asses a lot of moving parts," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. "We’re trying to figure out just how good compliance has been with OPEC’s production numbers. We need to pay attention to more than the overall production number."

West Texas Intermediate for March delivery declined 34 cents, or 0.6 percent, to settle at $53.54 a barrel on the New York Mercantile Exchange. Futures touched $54.34, the highest intraday price since Jan. 3. Total volume traded was about 15 percent below the 100-day average.

Brent for April settlement slipped 24 cents to $56.56 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $2.39 premium to April WTI.

OPEC Cuts

OPEC pumped 32.3 million barrels a day in January, the Bloomberg survey of analysts, oil companies and ship-tracking data showed. The 10 members of the group that pledged to make cuts implemented 83 percent of those reductions on average, but their efforts were offset by gains from Iran, Nigeria and Libya.

Accounting for the members who raised output and the suspension of Indonesia, OPEC’s total output remains 550,000 barrels a day above the target set out in the Nov. 30 deal. That means the group as a whole is only about 60 percent of the way toward the production level it deems necessary to eliminate a global oversupply and boost prices. 

"Bloomberg data shows that OPEC needs to make additional cuts," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone.

U.S. crude stockpiles rose for a fourth week to 494.8 million barrels, the Energy Information Administration reported Wednesday. Inventories of gasoline and distillate fuel also expanded last week.

Oil-market news:

  • The global oversupply should end in the middle of this year, Russian Energy Minister Alexander Novak said. Cuts under the deal with OPEC reached about 1.4 million barrels a day in January, he said.
  • Saudi Arabian Oil Co., which is planning what could be the world’s biggest share sale, will publish annual financial statements before the offering set for 2018, Energy Minister Khalid Al-Falih said.
  • Royal Dutch Shell Plc appeared to put the worst of the oil slump behind it as rising cash flow allowed Europe’s largest energy company to trim debt for the first time since the downturn began.
  • ConocoPhillips broke a string of disappointing results for major U.S. oil companies, trimming its fourth-quarter net loss after cutting costs and riding a rebound in crude prices.
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