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Oil prices dip on lingering doubts of supply cut commitments
[SINGAPORE] Oil prices dipped on Friday over lingering doubts that some producers might not implement announced production cuts in an attempt to curb global oversupply.
Brent crude futures, the benchmark for international oil prices, were trading at US$56.76 per barrel at 0756 GMT, down 13 US cents from their close the previous day.
In the United States, West Texas Intermediate (WTI) crude futures were at US$53.65 a barrel, 11 US cents below their last settlement.
Analysts said that current prices were around break-even levels for many producers, providing little reason for much bigger rises, barring unforeseen outages.
"Since the Opec cut announcement, oil prices are above the US$54 per barrel level which we believe is the... cash breakeven for the sector in 2017," US investment bank Jefferies said.
Friday's dips came after prices increased the previous day following reports of supply cuts from Saudi Arabia and Abu Dhabi coming into effect as part of efforts by the Organization of the Petroleum Exporting Countries (Opec) and other producers to curb a global supply glut.
Overall supply from Opec in December fell only slightly to 34.18 million barrels per day (bpd) from a revised 34.38 million bpd in November, according to a Reuters survey this week based on shipping data and information from industry sources.
While traders said oil markets were well supported by the agreed cuts, they said doubts remained that all producers would fully implement planned reductions.
"The ball is in Opec's park to deliver on the announced cuts and prove the naysayers wrong," said Virendra Chauhan, oil analyst at consultancy Energy Aspects in Singapore. "There will be some countries who will cheat...We expect zero compliance from Baghdad... And we definitely do not expect the Kurds to join in, given that they are autonomous from the federal government," Energy Aspects said in its 2017 oil market outlook, published this week.
BMI Research said that Iraq may send some of its crude through Iran via shared oil fields, in order to nominally comply with Opec's commitment to cut its production.
With Iran potentially 100,000 bpd short of its Opec production target, Iraq's 210,000 bpd planned cut could be lightened if the countries cooperated by enabling Iraqi oil to move through Iran, BMI said.
Both countries share five oil fields - North & South Azadegan (Majnoon in Iraq), North & South Yaran, and Yadavaran - which are estimated to produce around 400,000 bpd, BMI said.