Oil on Friday settled below US$52 a barrel in New York, more than US$1 lower than where it ended a week ago, after OPEC and its allies announced output cuts, as traders weighed incremental US shale growth against softer demand for next year.
Saudi Arabia’s plan to slash exports to the US next month is shoring up expectations that OPEC and its partners would deliver on last week’s promise to curb production by 1.2 million barrels a day.
Yet the oil market appears to have largely ignored cuts agreed to just a week ago, concerned by the relentless growth from US shale, which veteran crude trader Andy Hall said was making it hard to predict the market’s direction.
“The market may have to wait for OPEC to get the job done this time, given the perception that ‘OPEC plus’ was unable to cut enough to reduce the surplus expected,” said Michael Cohen, head of energy markets research at Barclays PLC in New York, referring to OPEC and its allies.
Crude has traded in the narrowest range since early last year so far this month as investors assess the production cuts pledged by the so-called “OPEC plus” coalition.
The International Energy Agency said unplanned outages in OPEC member states might double its intended curbs.
Still, the market was concerned that breakneck production from the Permian of West Texas and New Mexico and North Dakota’s Bakken shale fields might quash any price rallies.
“We really had a blowout day yesterday with the strong rally,” said Bob Yawger, director of the futures division at Mizuho Securities USA LLC. “I don’t think the headlines supported it so today’s move is more so a pullback to compensate.”
West Texas Intermediate (WTI) for January delivery on Friday fell US$1.38 to settle at US$51.20 a barrel on the New York Mercantile Exchange, down 2.4 percent for the week. The contract had closed Thursday’s session up US$1.43 at US$52.58 a barrel.
Brent for February settlement on Friday fell US$1.17 to US$60.28 a barrel on London’s ICE Futures Europe exchange, down 4.3 percent for the week. It had gained 2.2 percent on Thursday.
The global benchmark crude settled at an US$8.81-a-barrel premium to WTI for the same month.
Concerns about stronger production persisted even as US shale explorers continued to dial back drilling, with working oil rigs falling by four this week to 873, according to Baker Hughes Inc data.
That was the third decline in four weeks.
While it has become more difficult for traders to assess the market, those seeking to pick a trend should probably bet that oil will rebound from its recent 30 percent plunge, said Hall, once nicknamed “God” for his lucrative calls on crude.
Saudi crude shipments to the US next month could test the 30-year-low set in late last year of 582,000 barrels a day, down about 40 percent from the most recent three-month average, according to people briefed on the plans of the kingdom’s state oil company.
The final figure could still change, they added.
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