OPEC disappointment hits oil, stocks; sterling down on UK vote jitters

Oil languishes after OPEC fails to deepen supply cuts Asia stocks retreat

Oil languishes after OPEC fails to deepen supply cuts Asia stocks retreat

Regina Mayor, KPMG Global sector head of energy and natural resources, warned OPEC is being "overly optimistic", underestimating the power of the USA shale industry.

With U.S. output rising steadily and OPEC and its allies potentially ramping up production in 2018 to regain lost market share, many traders already expect another price slump.

The upshot is that the price of oil - and derived products like fuel - is unlikely to increase much in coming months, analysts say.

But David Elmes, professor at Warwick Business School and head of the Global Energy Research Network, thinks that the future of energy will not be in the production of more oil, but rather on the consumer side.

The OPEC-non-OPEC alliance will focus on cutting production by 1.8 million barrels per day (MMBPD) through the end of the first quarter of 2018, but doesn't consider reducing oil exports.

Producers have expressed confidence that the OPEC-led plan will bring down crude stocks to their five-year average of 2.7 billion barrels.

According to Press TV, Iranian Oil Minister Bijan Zanganeh said on the sidelines of the meeting that Iran, which has been exempted from the ongoing output cut deal, would continue producing at its existing level. He spoke only on condition of anonymity because he was not authorised to divulge the information prematurely. The financial markets had weeks to digest the announcement made by Saudi Arabia's oil minister Khalid Al-Falih and the Russian oil minister Alexander Novak that they agreed to an extension of nine months.

Though several deal participants have complained at various times about the output estimates provided by these secondary sources, these figures are considered by market watchers as more trustworthy for their independence, when compared with countries' self-reported numbers.

U.S. West Texas Intermediate (WTI) crude futures were below US$50 at US$49.15, though still up 16 cents from their last close.

Nigeria and Libya would also be exempted from the cuts as their output has remained curbed by disturbed conditions internally. The market had already priced in the expected extension and quickly sold crude when there was no surprise to the end of the meeting.

Petrocurrencies will benefit from the decision as prices will keep near current levels despite higher shale production.

More than 400 oil rigs are now working United States shale fields - an increase of more than 120 per cent compared with a year ago.

The deal, at least among OPEC members, will continue to be monitored by secondary sources, including S&P Global Platts' monthly OPEC production survey.

Kachikwu had said that the country is not opposed to joining OPEC production cuts but that would only happen when the country is back to full production. Crude prices are unlikely to rise substantially - and that means the era of windfall profits appears to be over for member nations, at least for now. "Output in the U.S. alone is projected by IHS Markit to rise by more than 900,000 bpd from the beginning of 2017 to the end of the year".

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