Oil prices fall on concerns over OPEC-Russia production deal and profit taking

By Roslan Khasawneh

SINGAPORE (Reuters) - Oil prices fell on Friday on concerns whether major producers would implement an OPEC-Russia deal to cut production and as investors took profits after Brent touched a 16-month high a day earlier on news of the deal.

"It looks achievable on the face of it, provided the parties to the latest production cut deal stick to their pledges, which has historically been somewhat of a sticking point," ANZ bank said on Friday.

But the cartel ability to overcome their differences and come to a last minute agreement was seen as a positive sign.

"While OPEC's adherence to the new allocations will be critical, the group demonstrated more cohesiveness than at any point since at least the 1.5 million barrels per day cut in 2008," said Jason Gammel of U.S. investment bank Jefferies in a report on Friday.

International Brent crude oil futures were trading at $53.52 per barrel at 0704 GMT, down 42 cents, or 0.78 percent, from their last close.

U.S. West Texas Intermediate (WTI) futures were at $50.91, down 15 cents, or 0.29 percent.

"I see it as profit-taking price-action after oil prices have rallied by almost 15 percent in 2 days as the markets reassess this historical output deal," said Phillip Futures analyst, Jonathan Chan.

Analysts are now focusing their attention on the implementation of the OPEC deal which was joined by non-OPEC Russia for the first time in 15 years to coordinate production cuts by a combined 1.5 million barrels per day.

"Compliance issues and a stronger than forecast revival from the U.S. shale sector represents the largest downside risk," said BMI Research on Friday. It maintained its forecast for Brent crude at $55 a barrel in 2017 due to "ample stock levels and spare capacity within OPEC".

Still, the market remained broadly optimistic in the longer term about an accord designed to help bring the oil market back into balance.

"This deal is significant. It sends a very strong message to the market and it should help the market find a balance," said Simon Flowers, chief analyst at Wood Mackenzie.

Flowers forecasts Brent to average $55-$60 a barrel in 2017, but cautioned this would "depend on OPEC being very careful to meet the terms of the agreement".

Price developments in crude futures over the coming days should provide evidence of the extent of the market's optimism for the deal.

"WTI has arrived at the peaks from the middle of last year and again in October," said Ric Spooner, chief market strategist at CMC Markets, adding the next movements in the futures should provide insight into exactly how positively traders view this week's agreement.

In the days prior to Wednesday's deal, the market assigned a low probability that OPEC would come to a meaningful agreement because of arguments between de facto leader Saudi Arabia and third-largest producer Iran.

But that changed after Russian President Vladmir Putin played a crucial role in helping the OPEC set aside differences to forge the cartel's first deal with non-OPEC Russia in 15 years.

(Additional reporting by Henning Gloystein; Editing by Michael Perry and Kenneth Maxwell)