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Oil prices jump more than 2 percent after OPEC output deal

Reuters  |  LONDON 

By Christopher Johnson

(Reuters) - prices rose more than 2 percent on Thursday, building on big gains made after OPEC and agreed to restrict output, even as analysts warned other producers were likely to top up supply.

The Organization of the Petroleum Exporting Countries agreed on Wednesday its first output reduction since 2008 after de-facto leader Saudi Arabia accepted "a big hit" and dropped a demand that arch-rival Iran also slash output.

The deal also included the group's first coordinated action with non-OPEC member in 15 years. On Thursday, Azerbaijan said it was also willing to engage in talks on cuts.

"OPEC, it seems, has gone for the most bullish option," said Tamas Varga, analyst at brokerage PVM Associates.

"OPEC has done its best to stabilise the market in the $50-$60 price range, but if they fail to deliver in the coming months, make no mistake, prices will fall well below the $40 mark again."

Benchmark Brent crude for February rose $1.64 a barrel to a high of $53.48 and traded around $53.30, up $1.46 by 1435 GMT. On Wednesday, the expired January Brent contract ended up $4.09 or 8.8 percent at $50.47.

U.S. light crude was up $1.30 a barrel at $50.74.

The OPEC deal triggered frenzied trading, with Brent futures trading volumes for February and March, when the supply cut will start to be visible in the market, hitting record volumes.

The March 2017 Brent futures contract traded a record 783,000 lots of 1,000 barrels each on Wednesday, worth $39 billion and beating a previous record of just over 600,000 reached in September.

Despite the agreed deal, doubts were widespread.

"Scepticism remains on individual countries' follow-through, which is keeping prices below year-to-date highs (of $53.73 per barrel in October) for now," Morgan Stanley analysts said.

prices are still only at September-October levels - when plans for a cut were first announced - and crude prices are less than half mid-2014 levels, when the price began to collapse.

OPEC produces a third of oil, or around 33.6 million bpd, and the deal aims to reduce output by 1.2 million bpd from January 2017, similar to January 2016 levels.

Analysts said the cuts could leave the field open for other producers, especially U.S. shale drillers.

"We do not believe that prices can sustainably remain above $55 per barrel, with production responding first and foremost in the U.S.," Goldman Sachs said.

(Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by Elaine Hardcastle and David Evans)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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Oil prices jump more than 2 percent after OPEC output deal

LONDON (Reuters) - Oil prices rose more than 2 percent on Thursday, building on big gains made after OPEC and Russia agreed to restrict output, even as analysts warned other producers were likely to top up supply.

By Christopher Johnson

(Reuters) - prices rose more than 2 percent on Thursday, building on big gains made after OPEC and agreed to restrict output, even as analysts warned other producers were likely to top up supply.

The Organization of the Petroleum Exporting Countries agreed on Wednesday its first output reduction since 2008 after de-facto leader Saudi Arabia accepted "a big hit" and dropped a demand that arch-rival Iran also slash output.

The deal also included the group's first coordinated action with non-OPEC member in 15 years. On Thursday, Azerbaijan said it was also willing to engage in talks on cuts.

"OPEC, it seems, has gone for the most bullish option," said Tamas Varga, analyst at brokerage PVM Associates.

"OPEC has done its best to stabilise the market in the $50-$60 price range, but if they fail to deliver in the coming months, make no mistake, prices will fall well below the $40 mark again."

Benchmark Brent crude for February rose $1.64 a barrel to a high of $53.48 and traded around $53.30, up $1.46 by 1435 GMT. On Wednesday, the expired January Brent contract ended up $4.09 or 8.8 percent at $50.47.

U.S. light crude was up $1.30 a barrel at $50.74.

The OPEC deal triggered frenzied trading, with Brent futures trading volumes for February and March, when the supply cut will start to be visible in the market, hitting record volumes.

The March 2017 Brent futures contract traded a record 783,000 lots of 1,000 barrels each on Wednesday, worth $39 billion and beating a previous record of just over 600,000 reached in September.

Despite the agreed deal, doubts were widespread.

"Scepticism remains on individual countries' follow-through, which is keeping prices below year-to-date highs (of $53.73 per barrel in October) for now," Morgan Stanley analysts said.

prices are still only at September-October levels - when plans for a cut were first announced - and crude prices are less than half mid-2014 levels, when the price began to collapse.

OPEC produces a third of oil, or around 33.6 million bpd, and the deal aims to reduce output by 1.2 million bpd from January 2017, similar to January 2016 levels.

Analysts said the cuts could leave the field open for other producers, especially U.S. shale drillers.

"We do not believe that prices can sustainably remain above $55 per barrel, with production responding first and foremost in the U.S.," Goldman Sachs said.

(Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by Elaine Hardcastle and David Evans)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

Oil prices jump more than 2 percent after OPEC output deal

By Christopher Johnson

(Reuters) - prices rose more than 2 percent on Thursday, building on big gains made after OPEC and agreed to restrict output, even as analysts warned other producers were likely to top up supply.

The Organization of the Petroleum Exporting Countries agreed on Wednesday its first output reduction since 2008 after de-facto leader Saudi Arabia accepted "a big hit" and dropped a demand that arch-rival Iran also slash output.

The deal also included the group's first coordinated action with non-OPEC member in 15 years. On Thursday, Azerbaijan said it was also willing to engage in talks on cuts.

"OPEC, it seems, has gone for the most bullish option," said Tamas Varga, analyst at brokerage PVM Associates.

"OPEC has done its best to stabilise the market in the $50-$60 price range, but if they fail to deliver in the coming months, make no mistake, prices will fall well below the $40 mark again."

Benchmark Brent crude for February rose $1.64 a barrel to a high of $53.48 and traded around $53.30, up $1.46 by 1435 GMT. On Wednesday, the expired January Brent contract ended up $4.09 or 8.8 percent at $50.47.

U.S. light crude was up $1.30 a barrel at $50.74.

The OPEC deal triggered frenzied trading, with Brent futures trading volumes for February and March, when the supply cut will start to be visible in the market, hitting record volumes.

The March 2017 Brent futures contract traded a record 783,000 lots of 1,000 barrels each on Wednesday, worth $39 billion and beating a previous record of just over 600,000 reached in September.

Despite the agreed deal, doubts were widespread.

"Scepticism remains on individual countries' follow-through, which is keeping prices below year-to-date highs (of $53.73 per barrel in October) for now," Morgan Stanley analysts said.

prices are still only at September-October levels - when plans for a cut were first announced - and crude prices are less than half mid-2014 levels, when the price began to collapse.

OPEC produces a third of oil, or around 33.6 million bpd, and the deal aims to reduce output by 1.2 million bpd from January 2017, similar to January 2016 levels.

Analysts said the cuts could leave the field open for other producers, especially U.S. shale drillers.

"We do not believe that prices can sustainably remain above $55 per barrel, with production responding first and foremost in the U.S.," Goldman Sachs said.

(Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by Elaine Hardcastle and David Evans)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

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