Crude oil prices turned sharply lower in early Monday trading after OPEC and non-member states kicked the production can down the road. File photo by Monika Graff/UPI. | License Photo
March 27 (UPI) -- Crude oil prices lost traction early Monday after parties to an OPEC-led production deal delayed action on a possible extension until next month.
Crude oil prices got support Friday as expectations built that a monitoring committee would agree to extend the terms of a six-month deal to curb production. A joint ministerial committee led by members of the Organization of Petroleum Exporting Countries and participating non-member states said progress was moving toward full conformity.
As of February, parties to the deal were six percentage points short of full compliance. Officials meeting in Kuwait during the weekend said that, despite rising production from countries like the United States, declines in offshore storage and other factors would have a stabilizing impact on the market.
"The [monitoring committee] will deliberate before submitting its recommendation to the participating countries," a joint weekend statement read.
Traders last week had expected firm commitments toward extending the deal, which was enacted in January. Markets turned lower in early Monday trading, with the price for Brent crude oil falling 0.7 percent to $50.46 per barrel about a half hour before the start of trading in New York. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.96 percent to $47.52 per barrel.
Despite the rough start, Helima Croft, the head of commodity strategy at RBC Capital Markets, said in a newsletter there was a general sense that even the reluctant players would agree to an extension when they meet again in April.
"We think both Russia and Iraq will eventually be in the roll over camp because their leaders will determine that their domestic interests will be better served by staying the course," she said. "However, we cannot rule out some confusing comments from these two."
Nezar al-Adsani, the CEO of the Kuwait Petroleum Corp., said the decline in crude oil prices was creating risks for investments, which the official Kuwaiti news agency, KUNA, said "could create unstable conditions in international markets."
OPEC economists in their monthly report for March reported the Kuwaiti grade of crude oil posted a 2.7 percent increase in price between January and February. The price for Brent was holding around $55 per barrel until mid-March, when steady gains in U.S. oil production and inventory levels led to some questions about the strength of OPEC's efforts to balance the market through managed production declines.