EMEA News
Oil Continues to Slide As OPEC Members Send Mixed Messages Prior To Vienna
Yet more melodrama and conflicting messages from the Organization of Petroleum Exporting Countries (OPEC) members over their tenuous agreement to reduce production has caused oil futures on Friday to stay on course for their biggest weekly percentage declines since January.
Brent settled down 74 cents to $45.61, while West Texas Intermediate dropped 59 cents to $44.07 per barrel; this amounts to a more than 8 percent and 9 percent drop respectively.
While the big fear driver for investors remains recent reports of surging U.S. crude inventories and meager demand (which is the exact opposite of what OPEC leaders such as Saudi Arabia have insisted is the true market picture), traders on Friday were also spooked by a seemingly deal-breaking conflict between the Saudis and Iran.
According to an OPEC source, during last week's informal cartel meeting in Vienna to discuss the deal, Riyadh vowed to raise oil output steeply if Tehran refuses to limit production – which it has famously and repeatedly stated will be the case as it strives to regain its pre sanction production and export status.
No sooner did this unverified story make the rounds than another anonymous source said the Saudis had made no such threat – but he warned that worldwide production will escalate if the OPEC deal isn't ratified.
Not helping matters any are comments from Ali Al-Naimi, former energy minister for Saudi Arabia, who told Bloomberg, "I don't think OPEC by itself should cut.
"Other producers now are thinking about cooperating [and] that's great: if they cooperate and deliver, then that's good."
Not surprisingly, Al-Naimi's optimism was echoed by the latest OPEC Bulletin, which stated, "We remain deeply optimistic about the possibility that the Algiers agreement will be complemented by precise, decisive action among all producers."
But it's unclear exactly what non-member nations are "thinking" of cooperating other than Russia, whose policy makers have repeatedly contradicted themselves with regards to their commitment to the deal; moreover, when Al-Naimi was asked by an aide in 2014 what the chance was of leading non-members Russia, Mexico, Kazakhstan, and Norway cutting production, the former energy minister admits to raising his hand and making "the sign for zero."
Echoing the sentiment of fed-up analysts, Jim Ritterbusch, president of Ritterbusch & Associates, said in a note, "We remain consistent in our long standing view that OPEC will be unable to patch together a deal capable of placing even a minor dent in global oversupply."
Meanwhile, in the comparatively straight world of fundamentals, Barclays said in a note that demand growth over July-September was less than a third that of the year-ago quarter, and it estimated last quarter's growth below 1 million barrels per day (bpd).
Barclays added that the consumption rise for the last quarter will not be much higher before averaging 1.3 million bpd in 2017.
Iran earlier this week announced it was closing in on a 4 million barrels per day output, and Ali Kardor, managing director of the National Iranian Oil Company, told Shana news agency that working in the oil industry "is like operating at war fronts, and we have to preserve our trenches by raising our production capacity as much as we can."
