Oil prices static on uncertainty over planned production cut

Dhaka,  Sat,  03 December 2016
Published : 24 Nov 2016, 21:20:15

Oil prices static on uncertainty over planned production cut

Russia to cut 2017 oil output plan by up to 300,000 bpd if freeze agreed
SINGAPORE, Nov 24 (Reuters): Oil prices were little changed on Thursday as uncertainty ahead of a planned OPEC-led crude production cut and thin liquidity during the US Thanksgiving holiday kept traders from making big new bets.

At 0752 GMT, Brent crude futures were trading at $48.98, up 3 cents from their previous close.

US West Texas Intermediate (WTI) crude was at $48.02 per barrel, up 6 cents from their last settlement.

Traders said market activity was low due to the US holiday, and there was a reluctance to take on big price directional bets due to uncertainty about a planned oil production cut, led by the Organisation of the Petroleum Exporting Countries (OPEC).

OPEC is due to meet on Nov. 30 to coordinate a cut, potentially together with non-OPEC member Russia, but there is also disagreement within the producer cartel as to which member states should cut and by how much.

Most analysts believe some form of production cut will be agreed, but it is uncertain whether it will be enough to prop up a market that has been dogged by a fuel supply overhang for over two years, resulting in a record three years of falling investments into the sector, according to the International Energy Agency (IEA).

IEA Director Fatih Birol told Reuters in Tokyo on Thursday that even if production is cut, prices could soon come back under downward pressure again as the OPEC-led cut would enable US shale oil drillers to massively increase their own output.

Beyond OPEC, traders said the strong US-dollar, which is at levels last seen in 2003 against a basket of other leading currencies, was influencing oil prices.

A strong dollar, in which oil is traded, makes fuel purchases more expensive for countries using other currencies at home, potentially crimping demand.

There were also signs of ongoing oversupply, with China's gasoline exports soaring over 100 per cent compared with this time last year, to 870,000 tonnes, as its refiners churn out more petrol than even China's huge consumer base can handle.

Another report adds from Moscow: Russia could revise down its 2017 oil production plans if a global output freeze pact comes into force, Russian Energy Minister Alexander Novak said on Thursday.

"According to our plans, (Russian) oil output is going up next year. If we keep production at the current level we are making our contribution, for us that essentially means a cut of 200,000-300,000 barrels per day (in 2017)", he told journalists.

OPEC nations are due to meet on Nov. 30 to try to finalize a pact on freezing oil prices.

Russian oil companies say they will boost output next year after reaching record levels in recent months, by continuing to commission new oilfields.

Those oil fields that have been put on stream in 2016 will continue pumping oil in 2017 and "as a matter of fact we will cut production on the brown fields," Novak said, referring to fields that have already been producing oil for some years.
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