You are here

Crude oil prices slip from 1-year high on mixed Russian response to Opec

Tuesday, October 11, 2016 - 23:38

[NEW YORK] Crude oil prices slipped on Tuesday, retreating from one-year highs, after mixed responses by Russian oil industry officials toward an Opec call for all major crude producers to cut output.

The International Energy Agency, the energy watchdog of the West, also said it unclear how rapidly global oil supply could fall in line with demand even if Russia and the Organization of the Petroleum Exporting Countries agreed on a steep enough cut.

"Net, we find that an agreement to cut production, while increasingly likely, remains premature given the high supply uncertainty in 2017 and would prove self-defeating if it were to target sustainably higher oil prices," analysts at Wall Street firm Goldman Sachs said in a note.

Brent crude oil was down 35 cents, or 0.6 per cent, at US$52.79 a barrel by 10:30 am EDT (1430 GMT), off the one-year high of US$53.73 hit on Monday.

US West Texas Intermediate (WTI) crude slipped 35 cents, or 0.7 per cent, to US$51.

Igor Sechin, Russia's most influential oil executive and the head of Rosneft, told Reuters that his company will not cut or freeze oil production as part of a possible agreement with Opec.

Mr Sechin's remarks came a day after Russian President Vladimir Putin said an output freeze or even a production cut were likely the only right decisions to maintain energy sector stability.

Russian Energy Minister Alexander Novak also reiterated Moscow's position on Tuesday that it was ready to work with Opec.

Opec, which groups Saudi Arabia with big oil producers such as Iran, Iraq, Libya, Kuwait and Nigeria and Venezuela, aims to cut 700,000 barrels per day of its own production, bringing output to 32.5-33.0 million bpd by the time of its next policy meeting in Vienna on Nov 30.

It will be Opec's first output reduction in eight years and comes two years after an oil glut forced crude prices down from highs above US$100 a barrel. Opec has asked non-Opec producers besides Russia to contribute with cuts too, although the United States, the world's No 1 oil producer, will not be part of the plan.

Analysts worry that if crude prices maintain their recent upward momentum, production of US shale oil, crimped this year by prices as low as nearly US$26 a barrel, will begin to increase again.

"A part of the described upside may anyway occur without prices having to average US$60 due to improved hedging opportunities currently already in place," analysts at JBC Energy said.

Goldman Sachs said there could be poor compliance with the output cut plan by non-core Opec producers, exemptions for countries such as Libya, Nigeria and Iran, and increased supply by non-Opec countries in 2017.

REUTERS

Powered by GET.comGetCom