Oil declines as OPEC resumes talks in hunt for production deal

An oil pumpjack
An oil pumpjack

Oil extended losses near $51 a barrel after OPEC entered a second day of talks in an attempt to draw up a deal to cut output.

New York futures slipped as much as 1.7%, falling for a third session. Saudi Energy Minister Khalid Al-Falih said on Thursday in Vienna that he isn’t confident of an agreement when the Organization of Petroleum Exporting Countries meets again with its allies on Friday. OPEC is discussing a proposal that would see the group reduce output by 650 000 barrels a day, with a further 350 000 barrel a day contribution from its allies, including Russia, delegates said.

Oil has plunged more than 30% from a four-year high in October as concern over oversupply was fueled by waivers given for some buyers of Iranian oil and g rowing crude inventories and production in the US. While Saudi Arabia’s energy minister said Wednesday that output cuts of 1 million barrels a day were adequate to balance the market, there’s still uncertainty over whether the amount would be enough to shift current bearish market sentiment and prop up prices.

“As things stand, the ball is in Russia’s court,” PVM Oil Associates analyst Stephen Brennock wrote in a report. “The odds are that the OPEC+ producer alliance will put on a show of unity and agree to a new production deal.”

West Texas Intermediate for January delivery dropped as much as 89 cents to $50.60 a barrel on the New York Mercantile Exchange, and was at $51.30 at 10:37 a.m. in London. Prices fell 2.7 percent to $51.49 on Thursday. Total volume traded was around 60 percent above the 100-day average.

Brent for February settlement lost 80 cents to $58.71 a barrel on London’s ICE Futures Europe exchange after falling 2.4% on Thursday. The global benchmark crude traded at an $8.58 premium to WTI for the same month.

OPEC kicked off a further day of talks on oil-production curbs after a summit on Thursday ended with no deal, as Russia resisted the big output cut that Saudi Arabia was demanding. Moscow wasn’t ready for a “substantial cut,” Saudi Minister Al-Falih said.

Russian President Vladimir Putin and Energy Minister Alexander Novak discussed cooperation within OPEC+ on Thursday during several meetings, Putin’s spokesman Dmitry Peskov said. Although Russia had agreed to a cut in principle, the eventual size of their contribution remained undefined through this week’s talks in Vienna. In private conversations earlier in the week, OPEC delegates said that the kingdom had favored a Russian cut of about 300 000 barrels a day, but Moscow was seeking a smaller reduction of about 150 000.

Meanwhile, as OPEC met in Vienna, news broke that American overseas crude shipments rose to a record 3.2 million barrels a day, turning the US into a net exporter for the first time in 75 years.

Other oil-market news: The Cboe/Nymex Oil Volatility Index increased 6.6% on Thursday.  Canadian oil prices  strengthened on Thursday amid forecasts that mandated cuts risk draining inventories too quickly. Chevron Corp.  raised its spending budget for the first time since 2014 even as crude prices plummet, doubling down on US shale.

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