Oil Prices Fell Thursday. File Image / Pixabay
The recent growing analytical consensus that the Organization of the Petroleum Exporting Countries (OPEC) would fail to agree upon an oil cut deal proved correct at its Vienna summit on Thursday, causing crude prices to tumble almost 3 percent.
Brent fell $1.77, or 2.9 percent, to $59.79 per barrel, while West Texas Intermediate ended the session down $1.40, or 2.7 percent, to $51.49 - this despite news that U.S. crude stockpiles fell by 7.3 million barrels in the week through November 30.
Although OPEC agreed in principle to cut production during its summit, internal sources told media that the cartel delayed a decision on specific quotas until it consults Russia on Friday - and unfortunately, Alexander Novak, energy minister for the former Soviet Union, was heard saying Thursday morning that it would be "much more difficult" for Moscow to cut oil output over the winter because of the cold conditions at Russian oil fields.
John Kilduff, founding partner, Again Capital
This is obviously a big disappointment to the market
John Kilduff, founding partner at Again Capital, remarked, "This is obviously a big disappointment to the market; it certainly gives the appearance of disarray within the cartel - and disunity more than unity for sure."
Bloomberg noted that the failure to secure a deal "is the latest example of how OPEC is under pressure from forces that are re-drawing the global oil map, leaving it increasingly dependent on the support of non-member Russia."
The Vienna talks were also stymied by Iran, whose energy minister refused to participate in any curbs due to the U.S. sanctions imposed against the Islamic republic; moreover, OPEC ministers further muddied the waters with regards to the cuts by discussing whether Libya and Venezuela should be exempted from any deal.
Nigeria too seemed reluctant to participate: Emmanuel Ibe Kachikwu, oil minister for that country, told Bloomberg television prior to the meeting that for some countries a cut of 1 million barrels per day (an amount subsequently suggested at the talks and smaller than originally proposed to take into account Canada's recent decision to cut back production) would be difficult to achieve.
When asked if Nigeria would be able to throttle back, he replied, "Yes, it would be very difficult to do that....but I'm keeping my fingers crossed," and he added that whatever his country could contribute, it would be in "very small numbers."
Earlier this week, Amrita Sen, chief oil market strategist at Energy Aspects, speculated that OPEC's failure to agree upon cutbacks would result in crude trading up to $10 lower: "I wouldn't put it past us to trade into the $40s for Brent."