Oil Near $52 as Investors Assess Impact of OPEC Deal Compliance

Updated on
  • OPEC, allies achieved record compliance with cuts in September
  • All options to rebalance the market “are left open”: JMMC

Oil sat near $52 a barrel as investors appear convinced OPEC countries aren’t cheating on their output-cut deal but remain concerned it may not really matter.

Futures closed 0.1 percent higher in New York after switching between gains and losses during the session. OPEC and its allies achieved a record-high level of compliance to production curbs. At the same time, commercial oil stockpiles kept by members of the Organization for Economic Cooperation and Development have decreased to 159 million barrels above their latest five-year average, according to the Joint Ministerial Monitoring Committee.

The market is consolidating just below its recent highs amid optimism that OPEC members are keeping their word on cuts, according to Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut.

Yet investors are waiting to see if “the effect of the production cut and increased demand really tightens the supply-demand balance," McGillian said by telephone. “Without signs that the overhang in inventory levels is still being whittled down, the rally starts to lose some of its momentum.”

Oil has climbed for two straight weeks, hovering above the $51 a barrel level in New York. The Organization of Petroleum Exporting Countries and its partners reiterated that all options to rebalance the market “are left open,” and said compliance with the cuts was 120 percent last month, according to the JMMC.

West Texas Intermediate for December delivery added 6 cents to settle at $51.90 a barrel on the New York Mercantile Exchange. Total volume traded was about 27 percent below the 100-day average.

See: Investors jump back into fray as oil-market revival beckons

Brent for December settlement dropped by 38 cents to end the session at $57.37 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.47 to WTI.

The comments from the JMMC are “a reminder to the market that there is commitment by several of the largest players -- Saudi Arabia, Russia -- to try and balance this market and they continue to talk up the prices on their success,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said in a telephone interview.

Meanwhile, in northern Iraq, oil exports via pipeline to Ceyhan remain below normal levels. That situation has led to “what appears to be a decent size outage in terms of production," Kilduff said. “That is helping to support the price modestly.”

Iraq began using a new offshore crude-exporting facility to help boost shipments by sea and make up for a suspension of pipeline exports from the country’s north due to a conflict with the self-governed Kurdish region.

Oil-market news:

  • Cushing, Oklahoma crude stockpiles declined by 500,000 barrels in the week ended Oct. 20, according to a forecast compiled by Bloomberg.
  • Noble Group Ltd. agreed to sell most of its oil business to Vitol Group, the independent trading house.

— With assistance by Ben Sharples, and null

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