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Libya remains exempted from OPEC oil cuts deal

04 June, 2017, 06:26 | Author: Paula Vaughn
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"There seems to be a little resistance on the price at US$55/bbl, but if OPEC members and a selection of non-OPEC members - notably Russian Federation - abide by the supply cut, the price could conceivably hit US$60/bbl by year end".

Extension of production cuts by 1.8 millions barrel per day (mbpd) for next nine month was well factored in as prices had already gained by about 18 per cent from May's low of $43.8.

Concerns remain that OPEC-led production cuts will support a further rise in output from the United States, where producers can operate at much lower costs.

Malaysia has pledged to cut its oil production by 20,000 barrels per day following a decision by the Organisation of the Petroleum Exporting Countries (OPEC). "Into 2018, we expect Brent would average at least $55 per barrel on a monthly basis".

Crude oil prices on Thursday witnessed a steep drop as disappointed investors were anticipating deeper cuts from OPEC and other major exporters who made a decision to extend their current deal to limit oil production for nine months.

Making the long oil trade all the more hard is that high US oil inventories mute the impact of output reductions by OPEC and other countries, indicating that oil bulls need to focus on other factors. "Nevertheless, we continued relations, but we should be more accurate", Minister Jabbar al-Luaibi told Rudaw Thursday in Vienna while participating in the OPEC meeting.

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Goldman Sachs warned the biggest risk to oil markets was what would happen next year, at the end of the OPEC-led production cut.

Gaining back some of those losses, Brent crude futures were at $51.83 per barrel at 0708 GMT, up 0.37 cents, or 0.7 percent, from their last close.

"The problem is that investors look at the impact today, while OPEC focuses on reaching stability in the coming six to nine months, so the long squeeze yesterday was overdone a bit", said Hans van Cleef, senior energy economist at ABN Amro.

Rather than restrain output, US producers are expected to increase output by more than 1 million barrels of oil per day next year.

Petrol prices are at their lowest since last autumn, with experts predicting that oil cartel Opec's campaign to drive up the price of oil could fail. Rising U.S. production could completely replace OPEC's output cuts of 1.2 million bpd by year-end, according to RBN Energy.

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