Crude oil dropped after Organization of Petroleum Exporting Countries
(Opec) decided to stick to its policy of unfettered output.
Futures fell on both sides of the Atlantic after closing above $50 a
barrel in London for the first time in seven months. While members of
Opec rejected a proposal to adopt a new production ceiling, ministers
were united in their optimistic outlook for markets. US output declined
for a 12th week and crude stockpiles dropped, according to a report from
the department of energy’s statistical arm.
Oil has surged about 85% in New York from a 12-year low earlier this
year amid disruptions in Nigeria, Libya, Venezuela and Canada and
declines in US output. Opec needs more time to come up with a new
production ceiling, outgoing secretary-general Abdalla El-Badri said
after the meeting in Vienna, adding that it’s hard to find a target when
Iranian supply is rising and significant Libyan volumes are halted.
“The good news yesterday was that Opec is getting along better,” said
Rob Thummel, a managing director and portfolio manager at Tortoise
Capital Advisors Llc who helps manage $14.1 billion. “The pain inflicted
on US producers, which was their goal, also hurt Opec members. A
reconciliation process is taking place.”
West Texas Intermediate oil for July delivery fell 46 cents, or 0.9%,
to $48.71 a barrel at 10.52am local time on the New York Mercantile
Exchange. Prices are down 1.3% this week after three straight weekly
gains. Total volume traded was 30% below the 100-day average.
Brent for August settlement slipped 49 cents, or 1%, to $49.55 a
barrel on the ICE Futures Europe exchange. Prices closed on Thursday
above $50 for the first time since 3 November. The contract is up about
0.5% for the week, heading for a fourth weekly advance. The global
benchmark crude traded at a 40-cent premium to WTI for August delivery.
Before the Opec meeting, Saudi Arabia had floated the idea of
reinstating a group production ceiling as a gesture to show it had no
plans to flood the market and it was serious about making the gathering a
success. Iran, which has rejected any cap on output as it restores
volumes following the removal of sanctions in January, argued that a
group quota would be meaningless.
Nevertheless, relations among Opec members improved significantly
after several acrimonious meetings, Iran’s oil minister Bijan Namdar
Zanganeh said in an interview in Vienna on Friday.
Prices are recovering and the market is in good shape, said Saudi
Arabia’s oil minister Khalid Al-Falih. Oil at $50 a barrel isn’t high
enough to spark a significant production gain, he told reporters in his
suite in a Vienna hotel.
“The Opec outcome was expected,” said Gene McGillian, a senior
analyst and broker at Tradition Energy in Stamford, Connecticut. “The
continuing decline in North American output and the idea that global
growth will boost demand have pushed prices higher. Whether they are
enough to push us decisively over $50 has yet to be seen.” Bloomberg
Caroline Alexander contributed to this story.
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