Crude oil prices off to a weak start in early Friday trading as traders react to verbal stimulus efforts surrounding an OPEC-led production agreement. File photo by Monika Graff/UPI | License Photo
NEW YORK, Jan. 13 (UPI) -- Doubts about whether all parties to an OPEC-led agreement to cut production will do enough to balance markets pushed oil prices lower early Friday.
Saudi Arabia, the de facto leader of the Organization of Petroleum Exporting Countries, put wind in the sails of crude oil prices Thursday after it revealed its production was just under 10 million barrels per day for a 22-month low.
Kuwait, Iraq and Saudi Arabia are among the producers showcasing their commitment to a November agreement to trim production to around 32.5 million barrels per day. Non-OPEC member Russia signaled last week it was honoring its word, but provided no production figures to match its claims.
Olivier Jakob, managing director of Switzerland-based consultant Petromatrix, said in an emailed report that OPEC is in "verbal support mode," suggesting rhetoric is the driving factor over concrete market fundamentals. By his account, with Libya and Nigeria showing increases in output as member states exempt from the production deal, OPEC was producing 33.1 million bpd.
Supply-side pressures brought on by higher U.S and OPEC oil production pulled oil prices down sharply last year. The price for Brent crude was down 0.5 percent about an hour before the start of trading in New York to $55.72 per barrel. West Texas Intermediate, the U.S. benchmark price, was off 0.7 percent to $52.65 per barrel.
Stephen Brennock, an analyst at broker PVM, said in an early Friday report that Saudi Arabia's announcement on production may be cover for fraying at the edges of the OPEC deal.
"As the Saudis hint at even deeper reductions in February, assumptions are rife that its enthusiastic approach to output cuts is an admission that cheating is expected on the part of other producers," he said.
Oil prices could be influenced later in the day after oilfield services company Baker Hughes releases weekly data on exploration and production activity. North American activity turned positive late last year and federal U.S. estimates show gains are expected in crude oil production this year.