Published: Thu, May 11, 2017
Business | By Max Garcia

OPEC likely to agree to cut oil production again in May meeting

OPEC likely to agree to cut oil production again in May meeting

US crude inventories fell 930,000 barrels for the week to April 28, but analysts had been expecting a drop of 2.3 million barrels.

CRUDE CONCERNS: U.S. benchmark crude oil futures fell briefly below the key $45 level before stabilizing.

OPEC and non-OPEC oil producers look likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, three OPEC delegates said on Thursday, downplaying the chance of additional steps such as a bigger cut.

After crude-oil prices took a beating over the past week, falling to their lowest level since before OPEC-led a deal to curb output in November, analysts at Goldman Sachs say crude may reaching a "capitulation" point.

The agreement in Vienna was created to speed the end of the worst oil downturn in a generation by mopping up excess supplies and boost prices, providing some relief to resource-rich nations whose economies have taken a big hit.

USA shale producers have increased production much faster and with greater volumes than expected as production costs were cut sharply in the low-price era and technology has continued to enhance efficiency of production, noted Nordea Bank.

The US data and some investors "losing faith with Opec" are not helping the oil price, said Abhishek Deshpande, an oil analyst at Natixis.

QUOTEWORTHY: "The collapse in oil prices saw (benchmark West Texas Intermediate) plunge as the market continues to probe for a bottom amid oversupply concerns", said Stephen Innes, senior trader at OANDA.

There was also a sign of slowing energy demand in China, the world's largest second largest oil consumer, when a survey showed growth in that country's services sector was at its slowest in nearly a year in April.

Brent for July settlement slumped as much as $1.74, or 3.6 percent, to $46.64 a barrel on the London-based ICE Futures Europe exchange.

Money managers have already cut their net long positions, a bet on a further price rally, by a third in the last two months.

"The market makers - the traders - are not fully convinced that OPEC and collaborating countries like Russian Federation will renew the cuts which they agreed in Novemeber". "That adds up", Kloza said.

Analysts said investors were anxious that oil nations would fail to ease supply fears at a meeting later in May.

While WTI hit its lowest since March 27 at $47.30 a barrel in the last session, Brent on Tuesday slid to its lowest since late March at $50.14 a barrel.

Opec is scheduled to meet on 25 May to decide whether to extend the cuts beyond June or to scale back production further.

The estimates followed data from the U.S. Energy Information Agency, which said American producers would likely increased their 2018 output by around 7.37% to 9.9 million barrels per day.

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