OPEC Rhetoric at Abu Dhabi Not Enough to Prevent Worst Market Slide Since November

On Friday West Texas Intermediate dropped 64 cents to settle at $52.37 per barrel, while Brent dropped 56 cents to end at $55.45.

This week's Atlantic Council Global Energy Forum in Abu Dhabi has been a significant platform for the Organization of the Petroleum Exporting Countries (OPEC) and some Arab countries to advance the notion that the cartel's cutback agreement is a success and that instead of worrying about an oil glut we should brace for a shortage; however, the market isn't buying the sentiments, and oil on Friday posted the biggest weekly decline since November.

West Texas Intermediate dropped 64 cents to settle at $52.37 per barrel, while Brent dropped 56 cents to end at $55.45.

Commerzbank AG pointed out that the flamboyant claims made in Abu Dhabi of OPEC cutback commitments and resulting success "cannot be verified" until monthly production data is released; meanwhile, trading has also been heavily influenced by recent reports of rising production in Libya and Iran, as well as U.S. output rising by 176,000 barrels per day (bpd) last week: "The exempted countries are going gangbusters in production and exports," said John Kilduff, founding partner of Again Capital.

Friday's poor market showing was also reportedly exacerbated by China experiencing the steepest falls in overall exports since 2009.

Abhishek Deshpande, chief energy analyst at Natixis SA, told Bloomberg, "The markets are trying to get a sense of what sort of compliance we will get"; producers are noticing that prices have not climbed to $60 yet, "and if they want that, they must provide the market with confidence."

For now, though, OPEC and its supporters prefer to dispense rhetoric: Mohammed Barkindo, secretary general for OPEC, told Reuters in an interview in Abu Dhabi, "I remain confident... with the level of commitment and enthusiasm that I have seen among the 24 participating countries whom I am in regular contact with that this historic and landmark decision will be implemented fully."

He added, "We have no price objective.. our objective has been the high level of stocks that has built up in period 2014, 2015 and up to 2016"- which doesn't jibe with so many members opting to pump at record levels right up until the OPEC agreement was put into effect several weeks ago.

Also on hand at the Abu Dhabi conference was Falah Al Amri, governor for OPEC and director-general of State Oil Marketing Organization of Iraq's ministry of oil; he told delegates that his country, which is preparing to ship a record 3.64 million bpd of crude in February, "is implementing production cuts.

"There are rumours that we are not cutting production; we are doing our best and we continue to reduce production to meet OPEC targets."

Amri claimed that Iraq production reduction "will be more than 200,000 bpd by the end of the month."

Back on the home front, Daniel Haynes, senior commodity strategist for ANZ, told CNBC that "there's a very good chance" that the production cuts will hold for the six month duration of the OPEC agreement, based on all of the "strong" rhetoric coming from the cartel: "I suspect we're going to see potentially even more cuts come through if the market remains skeptical."

He added that ANZ is bullish on oil for the short-term, and that "oil in the low $60s is quite a feasible scenario in the first half of 2017."

Several respected agencies have tried to ignore the rhetoric and assess the facts at hand, and in doing so Deloitte recently stated that it believes a modest $55 average will be the norm this year.