Crude oil price drops by over 5% as hopes for output cut fade

03 February 2016, Lagos – As hopes for a deal between the Organisation of Petroleum Exporting Countries (OPEC) and Russia on crude oil output cuts fade, the price of Brent fell more than five per cent on Tuesday, while United States crude slid below $30 per barrel.

Oil stock

Oil stock

Reuters reported that Brent for April delivery was down $1.82 at $32.42 a barrel, after settling down $1.75, or 4.9 percent  in the previous session.
The front-month contract for US West Texas Intermediate (WTI) was down $1.63 at $29.99, after falling to a low of $29.92. It fell $2.00, or 5.9 per cent, the session before.
Russian Energy Ministry had said last Monday that the country’s energy minister and Venezuela’s oil minister discussed the possibility of holding joint consultations between OPEC and non-OPEC countries in the near future.
But Goldman Sachs said it was “highly unlikely” the OPEC would cooperate with Russia to cut output, saying such a move would also be self-defeating as stronger prices would bring previously shelved production back to the market.
Underlining the well-supplied nature of the market, Russia’s oil output rose to 10.88 million barrels per day (bpd) in January, from 10.83 million bpd in December, Energy Ministry data showed Tuesday.
Stockpiles are still on the rise, leading many to speculate that global storage may be close to capacity, Sommer said.
US commercial crude oil inventories likely rose by 4.7 million barrels last week to a new record of 499.6 million barrels, a Reuters survey taken ahead of industry and official data showed.
The American Petroleum Institute, an industry group, releases its weekly inventory report later on yesterday, while data from the US government’s Energy Information Administration is due tomorrow.
Investors await economic data later in the week, including US nonfarm payroll and unemployment figures and producer prices from the euro zone.

The tumbling crude price has hit oil majors, with BP slumping to its worst annual loss in more than 20 years last year, its results showed.
Its shares fell more than 8 per cent. Exxon, meanwhile, reported a 58 per cent fall in quarterly profit and said it would cut spending in 2016 by a quarter.

 

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