OPEC has its work cut out to persuade the market that its cuts will stabilize oil prices.
Crude settled below US$50 a barrel in New York for the first time in more than a year, falling 2.6 per cent after Genscape Inc. was said to report a jump in inventories at the biggest American storage hub in Oklahoma. A dive for U.S. equities added to pressure on crude as investors anticipated another interest-rate hike from the Federal Reserve that could slow the economy.
Oil is on track for a third straight monthly decline despite efforts by OPEC, Russia and other major exporters to halt the slide.
“There’s always a question mark over to what extent the OPEC countries and Russia will or will not fulfill their promises,” said Pavel Molchanov, a Raymond James & Associates Inc. analyst. “There is naturally some skepticism.”
It typically takes about six weeks for OPEC nations to implement supply changes, and Saudi Arabia, the group’s biggest producer, faces added political pressure from U.S. President Donald Trump to keep the taps open, Molchanov said.
West Texas Intermediate for January delivery fell US$1.32 to US$49.88 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 9, 2017.
Brent for February settlement fell 85 US cents to US$59.41 at 2:33 p.m. on London’s ICE Futures Europe exchange. WTI traded at a US$9.33 a barrel discount to Brent.
“People are looking for evidence that the fundamentals are improving before committing to going long,” said Bart Melek, head commodity strategist at TD Securities in Toronto.
Surging American crude production has made the Bank of Russia skeptical about the ability of production cuts to boost prices. The country’s central bank reduced its price outlook for next year to US$55 from US$63.
–With assistance from Catherine Ngai and Rakteem Katakey.
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