Oil Prices Fall on OPEC Meeting

Oil Prices Fall on OPEC Meeting

"The move, which was then ratified by non-OPEC producers, was the base-case scenario for the market and means the 1.8 million barrel per day supply cut will roll over until the first-quarter of 2018".

"With supply-side dynamics undergoing a fundamental shift thanks to the impact of USA shale, only decisive action from Opec will boost prices from current levels, and so far investors have not been satisfied that Opec is tackling the issue aggressively enough". Three years ago, US shale producers needed to see prices of $70 to $80 per barrel to be competitive, he said.

At the time, non-OPEC output was falling at a rate of about 700,000 barrels a day, while global demand was growing around 1.5 million barrels a day, year on year, and "visible inventories" were declining by roughly 1.2 million barrels a day, he said. WTI-Brent spread was stable on May-2017. Although many investors expected that the oil cartel will deepen the amount of supply cuts to rebalance the market.

The energy ministry said in a statement that Kazakhstan also intends to review the terms of the obligations in November, taking into account the conjuncture in the world oil market.

The OPEC alliance faces competition from USA shale producers. The pre-announcement of the scope of the deal by the oil ministers of Saudi Arabia and Russian Federation also contributed to the fall along with other rumors of extended cuts and more countries joining the initiative.

Last week, Saudi Arabia and Russian Federation agreed on the need to prolong the current agreement on oil production cuts.

In the United States, which has the most timely inventory data, there are 516.3 million barrels of oil tucked away.

US West Texas Intermediate (WTI) crude futures were back below $50, at $48.61, down 29 cents, or 0.6 per cent. The American shale producers would have been the unintended beneficiaries of deeper production cuts even if such cuts would have succeeded in the OPEC-led group's objective of getting commercial stocks of crude oil down.

"I believe the goal of setting up this institutional dialogue is to exactly serve this objective, and to have a dialogue between OPEC as a producer and India as a consumer, to sensitise each other's concerns and to better understand our perspectives", he said at the meeting. The sell-off "is likely short lived, and we continue to believe that inventory draws in the coming summer months will be supportive of prices", they wrote.

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