Published: Sat, March 18, 2017
Money | By Oscar Reynolds

OPEC Partners' Oil Supply Cuts Faltered in February, IEA Says

OPEC Partners' Oil Supply Cuts Faltered in February, IEA Says

In a move to beat off competition but which contradicts the announced cuts, OPEC's de-facto leader Saudi Arabia unexpectedly cut light crude prices last week.

U.S. West Texas Intermediate and worldwide Brent crude are lower and in an extremely tight range early Friday.

The price of a barrel of Brent crude, the benchmark global contract, rose by 1 per cent to $51.55 a barrel. But an oil price rally after the deal has been hobbled by data showing persistently rising US stockpiles.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers cut production from January 1 to reduce record stocks of crude. Its members need higher oil prices to balance government budgets, but cutting back production to prop up prices means losing market share as other suppliers step in to fill the gap. Has increased significantly in the morning also because the United States Crude Oil Inventories have dropped in the negative territory after 10-weeks, the Crude Levels were reported at -0.2 million barrels in the previous week, the economic indicator has come much worse versus the 3.3M estimate. Some ask whether Riyadh has the appetite to continue while several OPEC and non-OPEC states fail to comply and as shale production is expected to rise.

The Organization of the Petroleum Exporting Countries (OPEC) and other suppliers including Russian Federation have pledged to cut production by nearly 1.8 million barrels per day (bpd) during the first half of this year to rein in oversupply and prop up prices.

Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 4.23 million barrels last week, again significantly trumping analysts' expectations for a 1.8 million-barrels fall.

US crude slid on Tuesday to its lowest since November.

The index's energy sector climbed 2 per cent as oil prices pulled out of a dive, with the most influential gainers including Cenovus Energy Inc, which rose 3.4 per cent to $16.58, and Encana Corp, up 5.3 per cent to $14.63. Oil production rose for a fourth week to 9.1 million barrels a day. Weekly data from the Energy Information Administration (EIA) indicate some potential weakness from gasoline, but we think this is more of a statistical anomaly and not from structural factors.

In reaction to the announcement, the Canadian dollar strengthened on Wednesday against its USA counterpart. Canada remained the top destination for USA crude oil exports in 2016, receiving 301,000 bpd, 263,000 bpd greater than the Netherlands, the second largest destination.

Richard Mallinson, of the consultancy Energy Aspects, said there...

On one hand, the bullish speculators are placing high hopes on a weaker dollar and OPEC-lead output cuts to underpin prices.

Analysts say the OPEC deal may be at stake if US producers continue to pose a threat to the oil cartel's market share.

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