Fears of oversupply pushed
oil prices to five-month lows on May 5 despite signals that Russia is ready to
join the Organization of Petroleum Exporting Countries in extending supply
cuts.
US WTI crude oil futures
fell more than 3% in early trading to less than $44 a barrel, the lowest since
November 14, Reuters reported. It fell 4% on May 4. Benchmark Brent also fell
3% to below $47, which is its lowest since November, when OPEC agreed to cut
output.
Traders are worried that
OPEC and other countries will not succeed to further cut output at their next
meeting on May 25. Russia, one of the non-OPEC countries to sign up to the
cuts, has signaled that Moscow is ready to extend the production cut agreement
with the oil cartel.
The 10 Organization of the
Petroleum Exporting Countries (OPEC) members’ crude output stayed unchanged in
April at 31.85 million barrels per day compared to March, a S&P Global
Platts survey released on May 5 showed. OPEC is still showing high compliance
with its production cut agreement, as increases in Angola and Nigeria were
offset by declines from Libya and Iraq.
"OPEC members can go into
their May 25 meeting in Vienna feeling good about their compliance levels,”
OPEC Specialist, S&P Global Platts
Herman Wang said.
"Even countries, like Iraq
and the UAE, which have come in for some criticism over their production
levels, moved closer to compliance in April. But an extension to the production
cut agreement is far from a done deal, with many details to be negotiated,
including cut levels, exemptions and duration, amid an increasingly skeptical
market. OPEC still has much to discuss.”
OPEC’s largest producer
Saudi Arabia averaged 9.97 million barrels per day in April, according to the
survey, below its quota under the deal of 10.058 million barrels per day. The
kingdom is seen as a driver of OPEC’s production cut deal, with Saudi Energy
Minister
Khalid al-Falih telling an April conference in Abu
Dhabi there appeared to be a growing consensus on a need to extend the cuts, as
global inventories remain stubbornly high.
Iraq, which has faced
criticism for not fully complying with its required cut, produced 4.36 million
barrels per day in April, the survey found, as the Taq Taq field in the
Kurdistan Region of the country has seen output decline, while exports from
Iraq’s Persian Gulf terminal also fell during the month.
Iran, which is allowed a
slight output increase under the deal, held production steady in April at 3.77
million barrels per day, the survey found, below its quota of 3.797 million barrels
per day. The UAE, also under pressure from fellow OPEC members to come into
compliance with its quota, lowered production slightly to 2.84 million barrels
per day, down 10,000 barrels per day from March, the survey found.
In Libya, a blockade of a
pipeline from the Sharara field to the Zawiya terminal in the country’s west by
a militia knocked production down significantly in the month to 550,000 barrels
per day.
Impacted heavily by
militancy over the last year, Nigeria and Libya are exempt from the production
deal, which led some OPEC watchers, according to Platts, to doubt the
effectiveness of the agreement, if production from the two countries were to
recover and offset any cuts.
https://www.neweurope.eu/article/oversupply-fears-push-oil-prices-five-month-lows/