Oil falls after OPEC comments imply no supply cut
LONDON – Oil prices fell on Friday as concern over global oversupply intensified after the head of oil producers’ cartel OPEC indicated there would be no cuts in production despite a huge global oversupply.
Benchmark North Sea Brent crude headed for its fifth consecutive weekly fall after comments on Thursday in Moscow by Abdullah al-Badri, secretary-general of the Organization of the Petroleum Exporting Countries.
Badri said rising demand would prevent a further fall in oil prices and suggested cuts in OPEC output would have little impact on the market.
Brent was down 70 cents at $52.61 a barrel by 0935 GMT after settling 7 cents lower in the previous session. U.S. light crude was down 90 cents at $47.62 a barrel.
OPEC members produced around 31.25 million barrels per day (bpd) in the second quarter, about 3 million bpd more than daily demand, a Reuters survey showed this week.
The surplus oil has gone into stockpiles around the world, filling storage depots from China to Chile, and driving prices down sharply. Both major crude oil benchmarks are down more than 50 percent from a year ago.
Figures from the U.S. Energy Information Administration (EIA) this week showed total U.S. oil stocks hit a third successive week of all-time highs at 1.969 billion barrels. Overall, U.S. stocks are up 145 million barrels from a year ago.
Commerzbank’s head of commodities research in Frankfurt, Eugen Weinberg, said OPEC must eventually cut back on production to avoid much lower oil prices.
“We are also hopeful that OPEC will agree on a stricter quota discipline at its December meeting,” Weinberg said.
Chart analysts say oil futures still look very weak.
Tamas Varga, analyst at London brokerage PVM Oil Associates, said a brief pause in the downtrend appeared to be over.
“Today hopefully will (tell us) if the relatively stable performance of the last two days is a correction, or the market actually is about to bottom out. From the technical perspective it is probably the former,” Varga said.
Investors awaited the release of U.S. employment data later on Friday for indications on the direction of the dollar.
Dollar strength has also weighed on oil prices in recent weeks as a higher U.S. currency makes fuel more expensive for oil importers who earn euros, pounds and other currencies.
The U.S. data could provide further clues to whether the Federal Reserve will raise interest rates in September. – Reuters