Oil prices down on profit-taking after two-day jump

Oil prices were on track for their largest weekly advance in more than a month on Friday, supported by planned OPEC output cuts, but profit-taking after a two-day rally kept benchmark crude contracts below the key $50-per-barrel mark.

Michael Poulsen, oil analyst at Global Risk Management Ltd, spoke with Radio Sputnik, calling Wednesday’s sharp rise a “kneejerk reaction”, after a previous attempt by OPEC to reach an agreement in April in Doha failed amid a disagreement between Saudi Arabia and Iran, two of the cartel’s biggest producers.

Russian Energy Minister Alexander Novak said on Thursday that the recent deal reached by the OPEC countries on curbing oil production was “positive”.

It would be recalled that Dr. Emmanuel Ibe Kachikwu, the Minister of State for Petroleum Resources, who led Nigeria’s delegation to the meeting, argued for the exemption of Nigeria from the production cut.

Venezuela- which depends on oil exports for 96 percent of foreign currency earnings- has been particularly hard hit by historically low prices over the past year.

Just days after OPEC agreed the framework for its first production cut in eight years, initial estimates of the group’s output this month show the potential bind faced by its most powerful member.

At a meeting Wednesday in Algeria, the 14 countries agreed to cut overall production to a range of 32.5-33.0 million barrels a day, or up to 700,000 barrels less than current output.

Fitch Ratings Agency on Thursday said that OPEC’s oil production target announced this week signals the potential for greater co-ordination among its members, but the target itself is largely symbolic.

NYMEX crude for November delivery was down 8 cents at $47.75.

Oil prices continue to be volatile amid of glut of global supply, largely coming from USA shale oil and countries like Saudi Arabia. High supply levels from OPEC countries, notably Saudi Arabia, as they seemingly strove to drive US shale gas producers out of business, were also central to the descent.

How much will each country actually produce will be decided in the next formal meeting in November.

The production-freeze agreement was the first of its kind since 2008, as Saudi Arabia softened its stance on regional rival Iran.

He also added that a floor price of $40 per barrel of oil could accelerate a drilling recover in North America.

“We also believe the downside to oil prices in the short term has been reduced significantly after the OPEC announcement and we expect higher oil prices in 2017 than in 2016″.