Oil prices slump but experts see rise to $60 before year end
Post-meeting, however, financial markets sold off oil after the production cut extension agreement largely due to the belief that not enough had been done to rid the market of the growing supply glut.
“If U.S. shale producers exceeded our projected increases, it’ll drive the price down again”, Arrington said.
Energy Minister of Saudi Arabia, Khaled al-Falih, stated that the Saudi government is considering some scenarios to extend the oil production cut from six to nine to 12 months.
Opec said the cuts could be extended at the next meeting.
Brent crude oil futures plunged 2.50 dollar or 4.63 percent to close at USD 51.46 a barrel at NYMEX.
“Both Brent and WTI traded around one-month highs ahead of the OPEC meeting, but were tempered when Saudi Arabia’s oil minister played down further reductions in any new OPEC output deal”. Some countries expected the extension to be limited to next 6 months but some of the OPEC partners projected to be nine months but some countries like Russian Federation are projecting it to gone beyond 9 months and expected to be continued until 12 months. That’s because USA shale oil producers have taken advantage of the uptick in prices since past year to ramp up production.
Just one day after OPEC announced a nine-month extension to its November production cut deal, the top oil official told reporters on Friday that “exports to the US will drop measurably”.
“This is partly because crude had already run higher in anticipation of the deal, partly because some analysts had been hoping for a deeper cut and partly because USA shale oil production is surging again, encouraged by crude’s advance from its lows under $30 in early 2016″, he said.
OPEC comprises 13 nations which collectively account for 40 per cent of global oil production, 73 per cent of the world’s oil reserves and set the tone for happenings in the oil industry.
Oil prices tumbled 5 percent after OPEC made its announcement yesterday, signaling the market expected more than just an extension of the current rate of cuts: it expected OPEC, combined with its non-OPEC collaborators, to deepen these to more than 1.8 million bpd.