Oil prices manage a moderate recovery in today’s trading session, climbing back from two consecutive sessions of considerable decrease on fears of member nations failing to comply to designated production cuts, in the first month of the supply-cut deal’s implementation.
The once stable OPEC deal is facing increased pessimism as concerns about true supply cuts increase on news of failures by member nations to comply to the parameters of the deal signed to cut production in November 2016.
Concerns regarding the strength of the deal designed to cut oil production, signed by OPEC in November, are increasing as member nations post unconvincing results in the first month of the deal’s implementation.
Although January, consequent of it being the first month of the deal’s imposition, had been predicted to be somewhat volatile as member nations post their results. The apparent failure of some members to comply with supply reductions, and apparent increases in production amongst other member nations has increased scepticism regarding the deal.
Prices of the commodity fell during trading sessions last week as Iran and Iraq posted their results of monthly production. Concerns were first raised when it was revealed Iranian floating storage had reduced by a considerable margin – from 32.5 million barrels in September, to 17 million, as referenced from ClipperData.
Such pessimism was then enhanced when results posted by Iraq strengthened the narrative of apparent failure to comply with the parameters of the deal, as some nations demonstrated no palpable reduction in production.
Libya’s increase in oil production experienced in January, with fears of continued increase, have added further confidence in an increasingly bearish notion, despite the general opinion still being one of relative bullishness. Oil production from the nation rose to a 3-year high of 708,000 barrels a day, subsequent to a fall to below 200,000 barrels a day experienced in 2016.
With the largest oil reserves on the African continent, the nation has demonstrated no palpable indication of reducing its production, adding to already increased pessimism concerning the success of the deal.
The price of Brent crude, the global oil benchmark, fell from a peak of $57.44/barrel on January 6, to a low of $53.57/barrel in yesterday’s trading session, as bears, fulled by increased pessimism on the OPEC deal in the wake of the release of production information, pushed the market lower.
However, today’s trading session has seen a moderate recovery of the commodity, standing at $55.30/barrel at 12:15 EST, representing an increase of around 3.25%.
Whilst a moderately bearish sentiment has gripped the market in recent trading sessions, the general opinion maintained amongst analysts remains one of bullish nature.
Chart from: https://www.dailyfx.com/crude-oil
Showing daily fluctuations in the price of Brent crude, the global oil benchmark. The considerable rise apparent at the most recent aspect of the chart represents the optimism experienced during the signing of the OPEC supply-cut deal in November 2016.