Oil Lingers Below $50 as Market Seeks Sign OPEC Cuts Are WorkingBy
Inventories may decline faster in the third quarter: Al-Falih
Goldman Sachs cuts WTI and Brent price forecasts for 2017
Oil fell as the market awaits stronger signs that OPEC-led production curbs, extended at a meeting last week, are having an effect.
OPEC and Russia’s deal to extend output limits through March was met with a sell-off as it didn’t include deeper cuts, a plan for the rest of 2018 or a new ally. Saudi Arabia’s Energy Minister Khalid Al-Falih, who sought to reassure markets last week saying stockpiles will drop faster in the third quarter, met Russian Energy Minister Alexander Novak in Moscow on Tuesday to discuss cooperation between the world’s two top oil exporters.
“The market was hoping we would get somewhat deeper cuts,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by phone. “There was also chatter surrounding a few other producers joining into the agreement, and there was hope expressed that there would be a plan beyond 2018.”
Oil has traded below $50 a barrel since the Organization of Petroleum Exporting Countries meeting in Vienna as investors turn their attention to the supply glut in the U.S., the world’s biggest crude consumer. While American inventories have dropped for seven weeks in a sign OPEC’s plan may be working, they remain stubbornly above the five-year average. Saudi Arabia plans to reduce exports to the U.S. to speed up that decline.
West Texas Intermediate for July delivery settled 14 cents lower at $49.66 a barrel on the New York Mercantile Exchange on Tuesday. There was no settlement Monday because of the U.S. Memorial Day holiday.
Brent for July settlement closed 45 cents lower at $51.84 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $2.18 to WTI.
Russian President Vladimir Putin and Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman hailed a new period of close relations at talks in Moscow. The agreement to curb oil production is very significant and “our coordinated actions helped stabilize the situation on the world hydrocarbons market,” Putin said Tuesday at the Kremlin meeting.
Goldman Sachs Group Inc. cut its 2017 Brent forecast to $55.39 a barrel from $56.76 and reduced its WTI forecast to $52.92 from $54.80, according to a report.
Goldman cutting its price forecasts “doesn’t help sentiment much because they have been kind of bullish ,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said by telephone. For a speculator, “this is the worst spot to be in because you are right smack in the middle of a trading range.”
- Libya’s oil output has fallen to 750,000 barrels a day after Arabian Gulf Oil Co., a unit of National Oil Corp. known as Agoco, cut output, according to a person with direct knowledge of the matter.
- SK Innovation Co. will continue to seek growth opportunities in North America’s unconventional oil, although profit dropped from crude exploration and production operations due to low oil prices, the company said in an emailed statement.
— With assistance by Tsuyoshi Inajima, Stephen Stapczynski, and Grant Smith