Brent crude, the global oil benchmark slid by 1.29% at 13:30 EST on sustained fears of a potential collapse of the OPEC oil deal signed last November.
The deal in which, via the incorporation of non-OPEC members, primarily Russia, and constituent nations of the cartel, most notably Saudi Arabia – the largest oil producer of OPEC – taking a significant production cut, had been orientated about a desire to push prices back to the levels seen prior to the commodity’s nosedive in July of 2015.
However the general notion surrounding the deal has already adopted an increasingly pessimistic tone, as the concerns of production level ‘cheating’ or simple refusal by constituent members to comply, may jeopardise the return of oil to any comfortable margin exceeding $60/barrel in the first half of 2017, as hoped and indeed predicted by many analysts directly subsequent to the signing of the deal.
With Iranian floating storage experiencing a significant reduction – from 32.5 million barrels in September, to 17 million, as referenced from ClipperData, and Iraqi production failing to reduce by any palpable margin of significance, concerns are becoming increasingly enhanced in regard to a potential collapse of the OPEC oil deal, designed to shave 2% from global production, thus returning the market to a state of relative stability – lifting if from the period of considerable saturation which pushed prices to a low of below $30/barrel in early 2016.
Prices fell yesterday as it was announced compliance by Iran and Iraq had not been as corresponsive with the perimeters of the OPEC deal as many had been expecting, thus instilling moderate concern amongst many analysts, who set about reviewing their bullish positions on the commodity.
With prices of Brent crude falling from a high of $57.11/barrel to $55.28/barrel in a single trading session on Monday, concerns were expressed vividly. Such pessimism has continued into today’s trading session. With Brent crude holding at $54.20/barrel at 17:30 EST, down 1.29%.
Concerns had also been lingering regarding the capacity of U.S. shale producers to increase their own production, in attempt to cash-in on the oil price rise, as inflated consequent of the OPEC deal.
The combined repercussions of such concerns has translated into a distinct shift in the notion maintained amongst many analysts – moving from a position of relative bullishness on the OPEC deal and prediction of a general trend of increase to be assumed by the commodity in the first half of 2017. However, increasing pessimism is considered likely to continue reducing the price of oil further in coming trading sessions. Although a bullish sentiment still exists – with many anticipating January, consequent of it being the first month of the deal’s imposition, to be capable of instilling some weariness in the enterprise.
Chart from: https://www.dailyfx.com/crude-oil
Showing daily fluctuations in the price of Brent crude, the global oil benchmark, as it rose from a low of under $30 a barrel in early 2016. The significant rise apparent at the most recent side of the graph represents the bullish sentiment assumed in the wake of the signing of the OPEC deal.