OPEC Moves to Shore Up Prices After Crude Tumbles Again
Crude prices fall again. File Image / Pixabay
Proving that Wednesday's price gains were merely a momentary snag, crude on Thursday resumed its plummet, with U.S. oil dropping 4.8 percent amid reports that the Organization of the Petroleum Exporting Countries (OPEC) will release member quotas in the hopes of stabilizing the commodity.
Brent fell $2.89, or 5%, to settle at $54.35 per barrel, while West Texas Intermediate dropped $2.29, or 4.8% percent, to settle at $45.88 per barrel.
The losses coincided with U.S. stock markets continued their decline on Thursday, which in turn had been triggered by the Federal Reserve raising rates the day prior.
John Kilduff, founding partner, Again Capital
The stars are just aligned right now in a bearish way
In what may be the understatement of the week, John Kilduff, founding partner at Again Capital, remarked that "There's just a really negative narrative out there; the stars are just aligned right now in a bearish way."
Fatih Birol, head of the International Energy Agency, said on Thursday that a meaningful increase in oil prices likely won't happen in the short term unless geopolitical problems other than what is current taking place occur.
Meanwhile, Mohammad Barkindo, secretary general for OPEC, stated in a letter seen by Reuters on Thursday that his cartel will release a table detailing output cut quotas for its members and allies in order to shore up prices.
He also wrote that to reach OPEC's proposed cut of 1.2 million barrels per day (bpd), the effective reduction for member countries will be 3.02 percent - higher than the 2.5 percent that was initially discussed (the rise is due to the cartel seeking to accommodate Iran, Libya, and Venezuela, which are exempt from the cutback deal).
Barkindo concluded, “In the interests of openness and transparency, and to support market sentiment and confidence, it is vital to make these production adjustments publicly available."
But Kilduff thinks Barkindo is "grasping for straws" and "panicked" by oil's dismal performance in recent days: "It just totally calls into question the sufficiency of these cuts; there's huge skepticism around it."
One person who may disagree with that view is Khalid Al-Falih, energy minister for Saudi Arabia, who earlier this week ridiculed the "non-fundamental" issues driving prices down and proclaimed that global oil stocks will fall by the end of 2019's first quarter: "I can tell you with a high degree of confidence that we will achieve balance between supply and demand in 2019 - make no mistake about it."