Oil prices fall from one-year highs on output cut doubts

Wednesday, 12 October 2016 00:01 - - {{hitsCtrl.values.hits}}

Singapore/London (Reuters): Oil prices on Tuesday fell from one-year highs touched the previous day as there were doubts that a planned production cut would have the desired effect of reining in over two years of global oversupply.

Oil prices jumped as much as 3% on Monday, with Brent hitting a one-year peak, after Russia and Saudi Arabia both said a deal between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members like Russia in curbing crude output was possible.

However, Goldman Sachs said in a note to clients on Tuesday that despite a production cut becoming a “greater possibility”, markets were unlikely to rebalance in 2017.

“Higher production from Libya, Nigeria and Iraq are reducing the odds of such a deal rebalancing the oil market in 2017,” the U.S. bank said, and added that even if OPEC producers and Russia implemented strict cuts, higher prices would allow U.S. shale drillers to raise output.

International Brent crude oil futures were trading at $52.84 per barrel at 0652 GMT, down 30 cents from their previous close, and below Monday’s $53.73 one-year high.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.09 a barrel, 26 cents lower than their last close, down from Monday’s high of $51.60.

Carsten Fritsch of Germany’s Commerzbank said “the expectations of an OPEC production cut surely played a role” in the recent price rises of the futures market, where large volumes of new long-positions have been built up as the market becomes increasingly confident about rising oil markets.

But sounding a note of caution, Fritsch said he had “significant doubts whether they (production cut targets) will actually be fulfilled” as the rivalry between OPEC members, who are fighting aggressively for global markets share, could prevent an effective deal.

For now, supplies keep flowing, with top exporter Saudi Arabia planning to send full contracted crude volumes to key Asian buyers in November, unchanged from October levels, industry sources familiar with the matter said on Tuesday.