Published: Mon, May 29, 2017
Markets | By Erika Turner

Oil edges up after dip on disappointing OPEC meeting outcome

Oil edges up after dip on disappointing OPEC meeting outcome

Ministers from OPEC and non-OPEC oil-exporting countries agreed on Thursday to extend existing production cuts for a further nine months to the end of March 2018.

Rising U.S. shale output won't derail OPEC's goals and a nine-month extension will "do the trick", Al-Falih said Thursday after the meeting in Vienna.

Crude oil plunged five percent following the Thursday announcement as investors were disappointed the meeting did not produce bigger supply cuts.

Brent for July settlement was at US$51.55 a barrel on the London-based ICE Futures Europe exchange, up 9 United States cents. WTI (Light Sweet Crude Oil) in NY dropped by 0.78% to $48.52 per barrel.

Prices edged higher by 0.35% to $48.88 in early trading on Friday.

Regarding the effect of the proposed partial sale of US Strategic Petroleum Reserve (SPR) on OPEC deal, the analysts noted that the impact on oil prices from a gradual sell-off of the SPR is likely to be small as commercial stocks are falling.

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"There are number of oil market variables which could play out over the course of the second half of the year". Two sources close to the matter told Bloomberg that starting next month, Saudi crude supplies to American importers will be reduced to below one million barrels a day next month - a 15 percent decrease from the monthly average so far in 2017.

Hamid stated that only decisive action from OPEC will boost prices from current levels, which is constantly facing the challenges of increasing U.S. shale output.

OPEC will face the test of defending market share and generating revenue growth as it transitions from the curbs, Goldman Sachs Group analysts including Damien Courvalin said in a May 25 report.

With rising oil production in the U.S., OPEC and Russian Federation are widely expected to lose some market share to U.S. shale, however, they are anticipated to help their economies as a rise in crude prices would generate more revenues. "All in all, the decision to reduce crude output should logically increase modify global prices". The consultant group said it expects total US and Canadian oil production will rise by nearly as much as was sidelined by OPEC and its non-OPEC partners.

"OPEC agreeing to nine months without deeper cuts leaves prices at the mercy of inventories and U.S. production and demand", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

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