Russian, OPEC ministers to meet this week on oil output cuts

Oil futures are down sharply in early morning trading, losing almost 3% of their value shortly after equities began trading in NY.

A cut in production always lifts prices, but the success of the OPEC agreement according to Crisil depends on adherence.

Oil prices on Tuesday fell for the first session since OPEC agreed to cut output last week after data showed crude production rose in most major export regions and on growing skepticism that the cartel would be able to reduce production. OPEC is hoping they will cut 300,000 barrels a day further than the 300,000 already promised by Russian Federation.

“We will see in six months what will be the requirement and take the right measures”.

On the apprehension of a rise in gas prices due to oil output cuts, IGU Secretary General David Carroll said that while the majority of world gas trade is still linked to crude prices, this percentage was declining towards a “decoupling” of the price linkage.

Re-balancing the market requires “courageous decisions”, Sada said. Iran, one of the stronger producers in OPEC, has room for production growth and two of the member states – Libya and Nigeria – were exempt from the deal as they work to resolve lingering conflict.

Some analysts have criticized OPEC’s oil cut plans, with some arguing that some member states will not follow the guidelines.

BMI Research was quoted as saying: “Oil markets are on track to tighten over 2017, which will be accelerated by OPEC’s decision to reduce production alongside non-OPEC countries”.

The U.S. EIA expects U.S. crude production to fall less than previously expected to 8.9 million bpd in 2016 and to 8.8 million bpd in 2017 from 9.4 million bpd in 2015, according to its monthly short term energy outlook. OPEC has promised that Russian Federation will deliver a 300,000 barrel per day cut, and said other producers will cut a further 300,000.

Contributing to this, according to the report, is US crude oil production that averaged 9.4 million barrels per day in 2015, and is forecast to average 8.9 million in 2016 and 8.8 million in 2017.

With that in mind, the next key date for oil prices may not the pow-wow on the December 10, but two days later when the International Energy Agency releases its latest shale output update, including a forecast for January production. “Overall, estimated oil-related investment requirements are close to $10 trillion in the period to 2040”.